Executive Interview: Q&A with Jane Drinkwalter

Jane Drinkwalter began her career in the natural products industry in 1973 as a manager of a natural foods store. She expanded her sales career as a broker, manufacturer and eventually sales executive. She helped establish Vitamer Labs as the industry leader of private label supplements for the natural products industry. Jane has been with Vitamer Labs since 1988 and founded VitaCeutical Labs in 1996. She has served as Treasurer and Supply Chair on the National Board for the Natural Products Association.

1) Vitamer has been making private label supplements since 1975. How has private labeling changed over the years?

A: I think the natural products industry has always been farther ahead of the curve in product quality than the general public, as they embraced our premium private label right from the beginning. Private label used to be “plain wrap” and quite generic in most grocery and mass market stores. In the late 1970’s Mrs. Gooch’s (and Sandy, in particular!) was a key account and insisted on full disclosure labeling of all active ingredients and excipients. This was 20 years ahead of DSHEA requiring it.

A recent Roper Survey said that more than 60% of all shoppers now say they purchase store brands frequently, up from 40% just three years ago. Eight of ten consumers say that store brands are as good as or better than national brands and nearly 20% of shoppers expect to buy more private label in the year ahead.

Mintel reports providing more than just a “cheap alternative” to national brands but are attracting shoppers with premium ingredients and health benefits. In 2005 PL foods accounted for 13% of new product launches, and in 2009, 27% of all new food launches.

Private label now encompasses “premium natural and organic” private label and as such, has expanded beyond value. Many brands have several brands within the family (for example: Lexus and Toyota; Whole Foods Market and 365; Safeway Select and O Organics and Basic Red) to differentiate segments within channels. This gives your own brand more ways to compete with national brands while encouraging the consumer to return to your store to purchase your product. Packaging, labeling and merchandising are now customized and specialized for each brand.

2) You have long been involved with NPA. What does support of trade associations do to benefit your company?

A: Although always a supporter of the association at a regional and national level behind the scenes, I served on the National Board for two two-year terms. I was on the Executive Committee as Treasurer and then as the Supply Chair. The association provides us with the support we need in the state and federal government to advocate for the rights for all of us to have open access to safe, appropriately labeled and manufactured dietary supplements. We use the NPA website frequently for technical information, resources and legislative updates. And of course networking with like-minded colleagues is a key benefit and I like helping move the direction of our industry – and my livelihood!

3) Who chooses the ingredients and suppliers?

A: Some ingredients are market driven, but our Purchasing and Quality Departments choose the suppliers after considerable vetting. Our Technical Marketing Department offers input, as well. At the very minimum, we need to know the ingredients and sub-ingredients, allergens, and that they meet our “do not use” requirements. Our suppliers know we will test for melamine in at-risk products, micro, and potency, as well as several different standards for each [individual] ingredient. We have been a part of the NPA third party certified GMP program for years, so we use those and the US FDA guidelines for testing and identifying incoming raw materials, in process testing and finished product verification.

Do you see a difference in branded ingredient companies vs. commodity based in terms of retailer preference?

For some ingredients with marketing and advertising support at the consumer level, yes. Some consumers are aware of the research on ingredients and specifically ask for them. Our discerning customers know how to market them to their best advantage and show there is a difference in these ingredients. Of course there is room for both. In some cases, price and value are more important. We offer both to our customers so their consumers can make their choice based on [their] needs and their wallets.

4) Vitamer sales materials refer to full merchandising support. Does this include education for retailers?

A: Absolutely! Our Technical Marketing Manager, Erin Silva, MS RD, has created detailed, science driven information for our sales team to present to our customers. Our sales team can offer these as a quick and casual in-aisle training or as a formal sit down power point. Our stores really like the background science and research that we help them break down in to bullet points for the consumer who needs to make a quick decision at the shelf level. We offer over 30 of these product, category and issue driven training modules.

Rather than setting suggested retail pricing you provide your customers with data to set their own pricing. What kinds of margins do you see your customers setting and how savvy are they in working with margins?

In this day and age, they all need to be savvy. I remember [many] years ago standing in a booth with customers who confused margin and markup. No more! This is the generation of bottom line driven retailing. We have a spreadsheet that “does the math” for retails from 40 – 60% Gross Profit Margin so buyers can create variable pricing based on competitive pricing, category management and their particular store margin goals. While we do not see all the pricing details of our stores, I know we have stores using from 40% GPM to 60% and many with variable pricing. Of course turns are equally important. A great margin does no good if the product does not turn adequately.

5) How difficult was it to add Organic products to your line?

A: Quite the challenge! After much research, we chose a facility certifier (QAI) and began selecting raw materials for this very unique product line. As consumers we are used to seeing certified organic foods, but there are few certified organic dietary supplements. There is a very limited supply of raw materials and even fewer organic-compliant excipients needed to make a tablet and guarantee mixability of a powder. What most people don’t realize is that every single raw material that goes into an organic product must have documentation that the raw material itself is certified organic (at any tier level), or if it is a non-organic excipient, must show it is organic-compliant. Our powders and tablets (to date there are no certified organic hard shell or soft gel capsules) products carry the appropriate UDSA organic logo (when applicable) and proper tier labeling of the organic status. All organic products are inherently non-GMO, which is also important to many shoppers. The initial process took about 12 months from concept to sale of the first product. We now have 11 products in our certified organic product line.

6) Talk about ingredient quality. Do you qualify suppliers? How much material do you reject? How has ingredient sourcing changed over the years? Are your suppliers audited? What percentage?

A: Ingredient quality is the cornerstone of our business. “Quality in, quality out.” It all starts with sourcing the highest quality raw materials going into our products that we can reasonably find to assure potency and purity.

1) A critical and often overlooked element in the process is developing relationships with our suppliers. This is not a “requirement,” but we believe it is certainly a prerequisite to establishing and maintaining a quality dialogue with them so that we can openly address issues that may come up from both the ingredient and manufacturing perspectives. A good example might be with the grind size of a particular excipient. A supplier might produce a generic product with a given particle size. Our experience with the ingredient over the years however has shown that a smaller particle size produces a better product. Because of the “relationship building” approach, we have on many occasions brought issues of this nature to our suppliers and they are more than willing to adapt their product to suit our higher quality standards and needs. The idea is to engage or involve our suppliers in the quality process and push “quality concepts” as far down the supply chain as possible, in some cases, all the way to the farming practices utilized in growing a botanical ingredient sourced from a foreign country.

2) Our supply chain is comprised of over 1,000 vendors or ingredient suppliers. Because of the large number, it is virtually impossible to physically audit each one. We do “paper” audit on each one (quality survey) and whenever possible, conduct actual site inspections.

3) We qualify our suppliers in the following manner:
a. We request “pre-ship” samples of the ingredient.

b. Pre-ship samples are tested in our Quality Control (QC) laboratory for identity, potency and purity as per predetermined specification or defined material quality parameters. This is very expensive and time consuming because of the amount of testing conducted which typically also includes heavy metal and microbiological assessments.

c. If the pre-ship sample meets specification requirements, a purchase of a given amount (usually known as a “lot”) is authorized by our Quality Assurance (QA) and QC function.

d. Upon receipt of the Lot, it is placed in Quarantine and all the previous testing mentioned above is repeated and the material must, again, meet specification requirements before it can be released for use in our production operations.

e. We test the first three lots received from a given Vendor and all receipts must meet predetermined specifications before the supplier is accepted. If any lot fails, the Vendor is disqualified. After successful qualification (3 lots), each and every receipt of that ingredient is tested for identity and one lot per year will undergo full qualification testing to monitor and/or confirm the quality characteristics of the ingredient.

4) Because of the relationship building and our in-depth ingredient qualification process, we rarely reject ingredients (less than 1%). The system is designed in such a way as to prevent that from happening.

5) Ingredient sourcing has changed dramatically in the last ten years. I would attribute this primarily to four factors:
a Advances in analytical science (testing methods)
b Advances in health care
c Increased public awareness
d Increased regulatory scrutiny

7) What would you like to see the industry do differently?

A: I think consumers and retailers are the primary gatekeepers of the industry. If they ask good questions of their suppliers and only buy products they have put through their vetting process, many products improperly labeled would disappear. [Companies] should be asking their suppliers if their products are compliant with the new dietary supplement Good Manufacturing Practices. Do they have a third party certifier? How do they test incoming raw materials? Are there adequate amounts of the ingredients in the products or just enough for “window dressing” to make a statement on the label? In addition to product selection, we each need all channels of our industry to up and be a part of advocacy. Manufacturers, distributors, suppliers, stores and consumers each have a large stake in our successful future. Attend a Lobby Day or involve your local and state legislators in your businesses to show them we are a very well regulated industry. Become involved in the Natural Products Association, Organic Trade Association or another association that interests you. Be involved in the direction and growth of our future!

8) As a member of the search committee for a new executive director of NPA, what experience and areas of expertise were priorities?

A: Advocacy is of course a key component to the association. We have hired a CEO/ED who possesses the ability to lead our association in accordance with our mission and vision statement. Our selection is the leader and speaker for the association as Presidents and Boards change over the years. John Gay has excellent experience in other associations with some of the same characteristics and challenges we have. He is as excited as we are about the opportunities we have in front of us. With health care reform, a well regulated industry and sales data that show dietary supplement purchases increasing, we have a bright future. Working with our experienced staff and lobbyists, John will help us keep a high profile on the Hill in Washington, DC.

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