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Articles from 2009 In August


NBJ

Weight-loss supplement sales plummet following Iovate's hydroxycut recall


What a difference a year can make. Twelve months after Nutrition Business Journal reported that the weight-loss category was making strides in improving an image tarnished by the 2004 ephedra ban, Iovate Health Sciences' voluntary recall of its No. 1 selling Hydroxycut weight-loss supplement brand has cast the category under a cloud of suspicion again, hampering consumer confidence and leaving companies wondering who's next in what seems an inevitable regulatory crackdown.

Making matters worse for the weight-loss category are the lingering economic slump and the fact that many weight-loss pill-form supplements are facing double-digit dips in sales — even at a time when, according to the Centers for Disease Control, 66% of Americans are overweight and more than one-third are considered obese.

According to NBJ estimates, weight- loss pill-form supplement sales continued their downward decline in 2008, with U.S. consumer sales across all channels falling 1.1% to $1.66 billion. This represents a loss of $18 million in annual sales last year for the weight-loss supplement market. Sales in this segment are now less than they were in 2006, when annual sales reached $1.69 billion. NBJ research shows that the compound annual growth rate (CAGR) for weight-loss pill-form supplements from 1997 to 2008 was 4.2%; however, the segment's CAGR from 2003 to 2008 was -1.6%. This illustrates the rocky sales environment these products have had to navigate over the last five years. The silver lining to all of this gloom and doom, however, is the steady growth in products such as meal-replacement formulas and protein- and fiber-based weight-management offerings intended to promote fullness and accompany important lifestyle changes. In fact, the public's growing mistrust of “magic pills” touting miracle weight-loss results may be slowly leading the industry in a healthier direction toward weight-loss solutions that are backed by better science and a more inspiring safety record.

“I see a movement more toward products and ingredients that are easily understandable to the consumer and are paired with lifestyle changes, rather than magic bullet approaches that are surrounded by hype,” said Douglas Kalman, PhD, RD, director of the nutrition division of Miami Research Associates, a supplement and pharmaceutical research firm.

A Rough Few Months For Weight-Loss Supplements

Long before the Hydroxycut recall began to make headlines, the weight-loss supplement industry was clearly in trouble. Market research firm Information Resources Inc. (IRI) reports that sales of “weight control candy/tablets” — which include sales of weight-loss supplement brands such as Hydroxycut, Slimquick, Zantrex and Dexatrim as well as GlaxoSmithKline's alli over-the-counter weight-loss pill at supermarkets, drugstores and mass merchandise outlets (excluding Wal-Mart) — were down 9.5% at the end of 2008, with some products slipping by as much as 68%.

This bad sales news has been coupled with growing regulatory scrutiny of weight-loss supplements. In December 2008, the U.S. Food and Drug Administration (FDA) warned consumers not to purchase 28 different supplement products marketed for weight loss, saying they contained “undeclared, active pharmaceutical ingredients,” including anti-seizure medications, diuretics, suspected carcinogens and pharmaceuticals in dosages far exceeding FDA recommendations. The agency later boosted the list to include 72 products. One product included on the list was the StarCaps brand, which was found by the FDA to contain a potent pharmaceutical drug called bumetanide that can have serious side effects. Manufactured in Peru, StarCaps was sold at GNC, Vitamin Shoppe and other retailers and marketed through celebrity endorsements.

Then in May 2009, the FDA warned consumers to immediately stop using Hydroxycut — the nation's top-selling weight-loss supplement brand — citing 23 reports of serious health problems, ranging from jaundice and elevated liver enzymes to liver damage requiring a transplant and one death of a 19-year-old man. Ontario-based Iovate Health Sciences voluntarily recalled 14 of its products following the warning. It also swiftly reformulated a new line called Hydroxycut Advanced that was back on the shelves by summer. (Iovate declined an interview with NBJ.)

With the FDA looking into which of Hydroxycut's many commonly-used ingredients — which included garcinia cambogia, gymnema sylvestre, caffeine, green tea and ginger — might have triggered the brand's adverse event reports, the entire industry took a hit. “It's bad,” said Jordan Rubin, CEO of Garden of Life, which makes fücoTHIN, the top-selling weight-loss supplement in the natural & specialty channel. “This has cast a dark shadow over the entire industry, and no one knows which ingredient did it.” FücoTHIN contains a combination of fucoxanthin and pomegranate-seed oil and shares no common ingredients with the recalled Hydroxycut.

Loren Israelsen, executive director of the United Natural Products Alliance and a member of NBJ's editorial advisory board, said the “question of incidence of use versus incidence of injury” has also complicated the forensic analysis conducted to determine which ingredient or ingredients in Hydroxycut led to the adverse event reports (AERs) for the brand.

“There has been a lot of Hydroxycut sold over a number of years,” Israelsen said. “Why have only a few people reported injury in view of millions of units used? This is one of the challenges presented by this case.”

Iovate's new Hydroxycut Advanced product is promoted as being a thermogenic agent that boosts a person's metabolism to burn more calories and increase his or her energy. The new formula, which is also available in instant drink packets, contains a proprietary blend of vitamins C and D, goji, acerola, blueberries and other ingredients. The key thermogenic ingredient in the new formula — and the only one left over from the recalled formula — is caffeine, a stimulant commonly found in weight-loss supplements. Among the ingredients no longer listed on the Hydroxycut label include chromium, green tea root extract and garcinia cambogia, a botanical extract marketed as Super CitriMax by InterHealth Nutraceuticals.

“I don't understand how Iovate can make any claims on this new formula — there is no data of any significance on any of the ingredients in there,” said Anthony Almada, founder and chief scientific officer at IMAGINutrition and a member of NBJ's editorial advisory board. “I suspect it was designed to quickly fill the void created by the recall and help the company recoup some of the sales that it lost.”

Recall Accelerates Losses

By July 2009 — two months after the Hydroxycut recall — sales of weight-loss candy/tablets at supermarkets, drugstores and mass merchandise outlets were down 15% from July 2008, according to IRI. Ironically, Hydroxycut sales were still up 12% for the 12-month period, despite the stall in sales that occurred as the company scrambled to reformulate and get a new version of its Hydroxycut brand on the shelves.

Supplement retailer GNC — another major nutrition industry player most immediately affected by the Hydroxycut recall — saw its second quarter 2009 sales growth slow to 2.3%. GNC grew its business by 2.5%, or $21.5 million, over the first six months of 2009. That figure would have been closer to 5%, but the company reported that sales were negatively impacted in both quarters by the Hydroxycut recall.

Meanwhile, Garden of Life — which also makes a weight-loss multivitamin — saw sales of its weight-loss supplements in natural supermarkets dip 25% from June 2008 to June 2009, according to SPINS. Numerous other companies selling through the natural channel (including NOW Foods, Iron-Tek and Nature's Way) also suffered double-digit losses for the category during this 12-month period.

Take a look at figures from May 2009 (the time of the Hydroxycut recall) to July 2009, and the numbers are even bleaker, especially considering the fact that this is the time so many Americans try to quickly lose a few pounds so they can squeeze into their summer swimsuits. According to IRI, sales of weight-loss pills from May 2009 to July 2009 were down 21% from the same three-month period in 2008, with Hydroxycut sales plummeting 78%, Dexatrim sales falling 43% and Relacore sales dipping 49%. The makers of Slimquick weight control tablets (which slid into Hydroxycut's first place spot after the recall) still saw sales dip 16% from the same three-month period in 2008.

“As for sales, there is no question this has been a challenging year for our industry,” said Bob Green, president of Nutratech Inc., a raw-material supplier of the weight-loss supplement ingredient Advantra Z. But Green too sees a bright side. “Certainly, the Hydroxycut recall is an opportunity for other products to pick up market share,” he said.

Ammo Against DSHEA

Sales aside, the recent flurry of FDA activity is being viewed by many as a sign of things to come for the industry. “[The Hydroxycut recall] is a big deal for the dietary supplement industry because it will inevitably invite comparison to the ephedra AER episode, and critics of the industry will no doubt call for some review of DSHEA [the Dietary Supplement Health and Education Act] as a result,” Israelsen told NBJ in May after the recall was first announced by Iovate Health Sciences.

Following the recall, the anti-obesity group The Reality Coalition (which is funded in part by GlaxoSmithKline) called on Congress to take a new critical look at DSHEA and require weight-loss supplement companies to be held to the same scientific standards as pharmaceutical companies. The Coalition has yet to craft an actual bill or find a Congressional sponsor, but many believe that with a tough new FDA director in place and with several Congress members — including Rep. Henry Waxman, a Democrat from California and chairman of the House Committee on Energy and Commerce — expressing concerns about dietary supplement safety, the time is ripe for tighter supplement controls. “We have a new administration and a new FDA. We know who to talk to in Congress, and we are ready to act,” said Reality Coalition Co-Founder George Blackburn.

Of course, even Blackburn concedes that with a massive healthcare reform bill on the table, it could be a while before a proposed DSHEA overhaul comes to the fore on Capitol Hill. After all, more than 15 months have passed since GlaxoSmithKline asked the FDA to begin treating weight-loss claims for dietary supplements as disease claims and the agency has yet to issue a response.

Still, most agree that increased enforcement and possibly regulatory changes are in the future. Some of this will come from the FDA inspections associated with the new Good Manufacturing Practices (GMPs) that are now in place for the dietary supplement industry. According to FDA spokesperson Susan Cruzan, the FDA intends to up the frequency of inspections of manufacturing plants. Under the new industry's adverse event reporting rules, which led to the Hydroxycut recall, the agency also expects to see more adverse reporting by both manufacturers and the public, Cruzan added.

Many in the industry say they applaud the FDA's stepped-up enforcement of current supplement laws — which some hope will prevent the need for new, tougher legislation. “There are ways to improve the situation without crushing the industry, but I don't think you could go to a pharmaceutical-like model and expect the industry to survive or thrive,” said Susan Trimbo, PhD, a Florida-based consultant and former head scientist for GNC. Trimbo said she welcomes increased government enforcement and wouldn't be opposed to some regulatory changes. “There does need to be more clarity around ingredients that can be used in products, and more guidance on maximum allowable levels,” she said. “There are some ingredients out there that just shouldn't be.”

Nutratech's Green said he too is open to reasonable regulatory changes that help prevent supplement companies from making unsubstantiated or bogus claims for their weight-loss products. “Do we think weight management should be treated as a [disease] claim — as specified by the GlaxoSmithKline petition? No. But we applaud efforts to rid our industry of bloated claims,” he said.” You cannot sit on the sofa, eat potato chips, and lose weight by taking a supplement. There is no magic bullet.”

A Trend Toward Reason

Although some weight-loss supplement brands have undoubtedly lost favor with consumers in recent years, meal-replacement products, such as Abbott Nutrition's Ensure Weight Control drink, remain resilient. NBJ estimates show that sales of weight-loss meal supplements increased 5.2% to $2.3 billion in 2008, adding $112 million in new sales. This was up from the 4.2% growth the segment saw in 2007.

Meanwhile Herbalife — which generates 63% of its revenues from weight-management products — posted its fifth straight year of double-digit sales growth, with $2.4 billion in net worldwide sales in 2008. The network-marketing company's offerings include Formula 1, a soy-protein meal-replacement drink; Personalized Protein Powder, a soy and whey formula aimed at boosting satiety; and Total Control, a weight-loss supplement said to boost metabolism.

How did the Hydroxycut recall impact Herbalife? “It has had zero effect on us — a non-event from our perspective,” said Herbalife Executive Vice President Des Walsh. “Hydroxycut promised rapid weight loss with minimal effort, and that is not our message to people at all. What we want is for people to realize that weight loss without good nutrition is not beneficial to anyone.”

Kalman said he predicts a continued flood of dairy- and whey-inspired protein and fiber products aimed at, quite simply, making people get full faster. Meanwhile, he said he also sees “hyped” weight-loss supplement ingredients that have a complex mechanism of action and scarce science behind them — such as hoodia gordonii — fading in popularity. Hoodia has already taken a sharp dive in sales in recent years, according to NBJ estimates; and in 2008, Unilever dropped its plans to develop a functional drink product fortified with the weight-loss extract. “Something like fiber is more understandable to the consumer,” said Kalman. “They know it will help them feel full and that will impact their food intake. It works.”

GNC is one retailer attempting to move away from a dependence on Hydroxycut-like products. “We are working to broaden the definition of the category beyond simple thermogenic diet products to a focus on weight management programs and tools that our customers can integrate into their larger health and lifestyle plans,” Beth Kaplan, GNC's president and chief merchandising and marketing officer, told NBJ.

Does this mean consumers and manufacturers will turn away from “thermogenic agents” like caffeine, bitter orange and green tea that speed up metabolism and burn calories swiftly? Probably not. But some say a new, safer generation of thermogenic agents is emerging and that these products are able to boost metabolism without amping up the entire central nervous system.

“The industry has gotten used to this central nervous system stimulation method of creating thermogenesis,” said Greg Horn, former CEO of GNC and current president of Specialty Nutrition Group. “There are alternatives out there that don't give you the racing heart and the rest of the negative effects, but there are few that have clinical research behind them.”

Horn said one that does is fucoxanthin, which is an algae-based thermogenic antioxidant said to boost metabolism within the abdominal fat cells, rather than throughout the entire central nervous system. Fucoxanthin is the key ingredient in Garden of Life's fücoTHIN weight-loss supplement, and Horn helped bring the ingredient to market. Nutratech's Advantra Z — which is present in roughly 100 weight-loss products, including Twinlab's Ripped Fuel and CortiSlim — is also considered a non-stimulant thermogenic and has 15 clinical research studies on safety and efficacy behind it.

“If anything, this recall will have more consumers demanding weight-management supplements with tried and true thermogenic ingredients like ours, which has a wealth of research supporting its safety and efficacy,” said Green.

Moving Forward

Numerous sources for this story — including direct competitors of Hydroxycut — came to the defense of Iovate Health Sciences, pointing out that considering the millions of people who have used the product over the years, the number of adverse events was relatively small. They say the media over-hyped the Hydroxycut story. “Properly researched, regulated, prescribed and used drugs are the fourth most common cause of death, estimated at 90,000 to 160,000 per year, but are rarely reported,” Green said.

However, Almada takes a different view. “Why didn't Iovate do long-term studies to show both the efficacy and safety of the Hydroxycut brand? It would have been very easy. They certainly had the money and they pride themselves on being researched-oriented. If they did do the research, why were no studies ever published on the finished product? Perhaps the research showed the product didn't work and wasn't safe.”

In the long run, experts say the weight-loss supplement market will rebound. Human nature, after all, keeps many consumers still hoping for a quick fix to their weight-management problems. As a result, the Hydroxycut recall will have nowhere near the devastating effect the 2004 ephedra ban had on weight-loss supplement sales. “There are a lot of other products out there that could take the place of Hydroxycut,” said Vitamin Shoppe CEO Tom Tolworthy. “There was nothing that could have taken the place of ephedra.”

But there are lessons to be learned nonetheless. Lesson one: Do the research — preferably on the finished product. Lesson two: Expect to be inspected by the FDA. Lesson three: Put safety first.

“When the number one product in a category goes down it can sometimes seem like cause for celebration by competitors, but I don't think that's the case here,” said Garden of Life's Rubin. “It just means that this category is getting a lot of scrutiny right now. This could happen to anyone.”

NBJ Bottom Line

Nutrition Business Journal believes the Hydroxycut recall will ultimately be a good thing for the dietary supplement industry if it encourages weight-loss supplement manufacturers to care as much about their products' safety and efficacy as they do about expanding and protecting their bottom lines.

Given the safety scares and instances of spiked weight-loss supplements, NBJ editorial advisory board member Anthony Almada advises all consumers to call the companies they purchase dietary supplements from and ask questions: Are there independent studies conducted on humans showing the safety and efficacy of a specific finished product? Who manufactures the product, and what testing is done to ensure its safety and purity? From a consumer's perspective, this seems like good advice. However, too many supplement companies, particularly in the weight-loss category, hide behind an evasive cloak of 1-800 numbers and Websites, making it difficult for a consumer (or an industry journalist) to get through. For instance, our calls to Iovate Health Sciences' headquarters were greeted with a recorded message directing callers to a Hydroxycut Website with minimal information. A request to be connected to the administrative offices for Slimquick Laboratories for an interview was met with a polite, “We don't give that information out.” Repeated calls to CCA Industries Inc. (maker of Mega T Green Tea products) were not returned. How is this good for consumer confidence?

Functional ingredients industry chatter

Food fight
"What is becoming more evident every day is that while Republicans reward their base, Democrats kick theirs to the curb."

— David Murphy, founder and director of Food Democracy Now!, about the Obama administration's so-far unsuccessful attempts to fill the position of Under Secretary for the Food Safety and Inspection Service with a real reformer, rather than someone with close ties to the food industry

They are a changin'
"The scale of change is huge. Across all food and beverage categories and all eating occasions, people are demanding healthy natural choices as the norm. It's a lifestyle decision. The PureVia Reb-A story is only just beginning."

— video on the PureCircle web site

That's more like it
"We support the results of the work on these issues and support their adoption. The drafts finally agreed upon endorse a number of comments made by IADSA, and we welcome the progress that has been made."

— IADSA chairman Byron Johnson, commenting on the adoption by the Codex Alimentations Commission in July of five key issues for the food-supplement industry, including a 'solid framework for the potential future application of the risk-assessment method by Codex for the use of vitamins, minerals and other substances in food supplements.'

Private brands capturing market share

With the economy in stall, consumers are turning to budget food items, but not necessarily sacrificing quality to do so.

According to Mintel GNPD, nearly 1,800 new US private-label foods have appeared on retail store shelves thus far in 2009, which is 27 per cent of all new food products. In 2005, private-label foods comprised only 13 per cent of food product launches.

As the recession causes more Americans to cut down on food spending, private-label companies are benefiting, Mintel says. The US private-label market grew 9.3 per cent in 2008 (compared to 4.5 per cent for branded food sales). Mintel forecasts the category will grow another 8.1 per cent by the end of 2009.

These new labels are providing not just cheaper alternatives to national brands; they are luring shoppers with premium ingredients, portability and health benefits, Mintel explains.

"Not only have private-label introductions increased, but product innovation is reaching unprecedented highs," said Krista Faron, senior analyst at Mintel. "What has been fascinating to see is that private-label brands are now coming up with creative food innovations before the major branded labels are - not what typically has happened."

Historically, it is the 'me-too' phenomenon that has driven private-label product launches, Faron explained. Only when a new product concept, launched by a major brand, reached critical mass did a private-label company pick up on it. "This is really the first time we have seen innovation and trail-blazing by private-label companies," Faron said. "It's very exciting."

Considerations of health and nutrition are increasingly influencing this product development, Faron said. For example, Safeway's Lucerne Foods label unveiled a brand called Eating Right in 2007, and in 2008 the company added several notable healthy products, including kids' Whole Wheat Mini Ravioli with fibre and protein, plant sterol-fortified Apple Cinnamon Granola, and Light Ice Cream Cups containing probiotics.

Target and its Archer Farms label, as well as Trader Joe's, are two more examples of increasingly innovative and health-focused retail companies, Faron says.

In the Americas over all, private-label food launches were strong in 2008, but down slightly from the previous year. In North America, 4,957 products were launched in 2008, vs 5,307 in 2007. In Latin America, 1,193 private-label food products were launched in 2008, vs 1,343 in 2007.

New private-label food-product launches in North America, by year

Date published

Number of products

2004

2,367

2005

2,921

2006

3,763

2007

5,307

2008

4,957

2009*

2,181

Total sample

21,496


New private-label food-product launches in Latin America, by year

Date published

Number of products

2004

255

2005

421

2006

880

2007

1,343

2008

1,193

2009*

979

Total sample

5,071

Source: Mintel Global New Products Database (GNPD) *2009 includes only new products tracked through July 30, 2009

Food companies turn to experts for help amid health-claims crisis

Mountains of effort have been invested by the functional-foods and ingredients industries into pushing for changes to the European Nutrition & Health Claims Regulation.

Time and again, however, the European Food Safety Authority — which is responsible for the assessment of claims — has refused to yield to calls to relax the stringent criteria it is applying to dossiers. This means that while headlines are dominated by appeals for reform, behind the scenes companies that wish to continue making health claims for their products have had no choice but to quietly get on with preparing for the new regulatory environment.

This has created a whole new revenue stream for a select group of companies capable of providing the specific understanding and services food businesses require to navigate the regulation, particularly in key areas such as study design, interpretation of scientific research and presentation of dossiers.

Experience has shown that failure to get these elements right when preparing a dossier invariably leads to a negative opinion from the European Food Safety Authority, raising demand for the expertise of companies such as international scientific and regulatory consulting firm Cantox Health Sciences International.

"Three or four years ago about 20 per cent of our work would have been in relation to efficacy, while probably 80 per cent was in relation to safety submissions," says Nigel Baldwin, the company's senior scientific and regulatory consultant. "Now I would say that 40-50 per cent — and certainly the majority of new business — is in relation to claims."

There are broadly three categories of companies that come to Cantox for help, Baldwin says. "There are the companies that need us to do absolutely everything for them. There are the companies that have done a fair amount themselves and just need us to review the dossier they've written, and need a second opinion. And then there are the companies that might have dug themselves into problems. A number of companies are coming to us in the latter stages of their application process where they've suddenly realised that the EFSA is playing real hardball, and need us to help them." In essence, he adds, "a lot of people pay us to think like the EFSA."

One key aspect of the claims approval process is that the EFSA is looking for high-quality, 'gold-standard' clinical studies — the kind more often associated with medicine — to back up submissions. This has created an attractive business opportunity for contract-research organisations (CROs). This prompted global food-safety-testing specialist Silliker in June to buy France-based CRO Biofortis. Announcing the deal, Silliker said, "Regulations are tightening and food companies need additional expertise and support to prove the effectiveness of their products."

"The EU Nutrition and Health Claims Regulation has certainly had a positive impact on our business," confirms Stéphane Deniau, business manager at Biofortis. "We have experienced an increase in enquiries regarding our services. Many food and dietary-supplement companies are still unsure of how to interpret the rules, causing uncertainty on whether they should conduct clinical trials to communicate the properties and benefits of their products to consumers. The regulation, coupled with the growing popularity of a wide range of functional-food components, will in all likelihood result in greater demands for human clinical studies."

In other areas, too, the regulation is changing how companies approach the market. European ingredients supplier Beneo Group says it has seen a "significant increase" in its workload in relation to developing product concepts that will meet the proposed EU nutrient profiles. These profiles will prevent some products high in salt, sugar and saturated fat from carrying health claims, to stop consumers being misled into buying products they believe are good for them.

"Now I would say that 40-50 per cent - and certainly the majority of new business — is in relation to claims."

—Nigel Baldwin, senior scientific and regulatory consultant, Cantox Health Sciences International

"We have seen a shift in thinking as major food producers within the industry begin to look at their product portfolios and analyse the impact that the nutrient profiles will have on them," says Rudy Wouters, head of food application technology at the Beneo Group. "Although the nutrition profiles under development include a two-year adoption period, money and time is being invested now by the major players to ensure that they are ready for a new era of nutrition and health claims."

The experiences of Cantox, Biofortis and Beneo illustrate that despite the intensity of the industry's lobbying efforts, functional-foods and ingredients companies have largely reconciled themselves to adapting to life under the health-claims regulation. But the fact that many have resorted to bringing in outside help to do so also indicates that the regulation will come at a significant financial cost to the industry. Whether such investment will prove to have been in vain rests, ultimately, in the EFSA's hands.

Niagara Natural Revolutionizes Functional Fruit Snacks: Announces Co-packing and Private Labeling Programs

John Boot, CEO and founder of Niagara Natural Fruit Snack Co., has announced that the manufacturer is now fully ready to co-pack, private label and partner with North American companies that want to enter the functional fruit snack market.

Niagara Natural produces all-natural, 100% fruit snacks to which can be added specific dosages of a range of nutraceutical and functional ingredients desired by the marketer, such as 32 mg of Meg-3 EPA and DHA, for example. The snacks are free of preservatives and artificial ingredients, as well as free of nuts, gluten, wheat, trans-fats and cholesterol.

In April 2009, Niagara Natural opened its new, state-of-the-art facility in the former CanGro Foods Inc. plant, situated in the heart of in the bountiful Niagara fruit-growing region near the U.S.-Canada border. The manufacturer has the ability to produce 200,000 units per day (18g to 20 g) as well as sophisticated packaging technology allowing for customized, consumer-attractive packaging options.

“It took awhile but we have the ‘formula’ down pat: truly healthy and tasty treats that are more than benign – they are good for you,” Boot describes. “Parents and school nutrition groups across North America will, without a doubt, overwhelmingly choose these snacks over conventional semi-natural counterparts.”

Boot adds that prior to the opening of the Niagara Natural manufacturing facility, one of the challenges to marketing all-natural, 100% fruit snacks had been in the limitations of producing unique, fun snacks that appeal to children. “Our processing equipment is capable of generating a wide variety of uniquely shaped, satisfying snacks. Additionally, our latest packaging technology allows for high quality and one-of-a-kind packaging formats. Co-packers or private labelers can choose stock or custom flavors and shapes.”

Further, the fruit snacks are produced in a modern HACCP-accredited, GMP- and Kosher-certified and nut-free facility. Niagara Naturals is also committed to being an environmentally sustainable and carbon-neutral production facility. The plant and its equipment are energy efficient, and drying system waste-water is recycled.
Stephen Lukawski, CEO of Niagara-on-the-Lake, Ontario-based Market-Wise Enterprises, Niagara Natural's North American sales agent for the nutraceutical fruit snack division, says, “Each snack provides the nutritional equivalent of one full serving of fruit, including fiber, antioxidant vitamins and enzymes, plus added nutraceuticals or functional ingredients that remain fully stable in the matrix. To my knowledge, Niagara Natural is the only manufacturer capable of producing such fruit treats that have the additional benefits of great taste and unique shapes. Finally, because of the company’s capabilities, these snacks may be offered at an attractive cost of production and packaging.

For more information about Niagara Natural Fruit Snack Co., log onto www.naturalfruitsnacks.ca, or call Stephen Lukawski 905-878-995 or email him at [email protected].

About Market-Wise Nutrition
Founded by Stephen Lukawski in 2000, Market-Wise Nutrition establishes alliances with ingredient producers to sell, market and distribute science-based and innovative natural ingredients for dietary supplements, food, beverages and cosmeceuticals that promote a healthy and natural lifestyle. Market-Wise Nutrition has established itself as a reputable supplier of science-based raw materials with a principal focus on consumer safety, environmental sustainability, and product efficacy. Market-Wise has successfully demonstrated its abilities in strategic planning, product development, research and marketing, resulting in an ongoing annual growth rate that keeps pace with the industry. Log onto www.marketwisenutrition.com

Nordic Naturals to Host Multiple Events at Natural Products Expo East in Boston

Nordic Naturals hosts an extravaganza of events for retailers, media, and participants at this year’s Natural Products Expo East in Boston, September 24-26th—with education, new products, celebratory toasts, and more! The company will have two booths this year: a retail booth #1135 and a pet booth #1535.

• Educational seminar: “Omega-3 Fish Oil & Antioxidants: The Key to Longevity” with famous neurosurgeon Dr. Joseph Maroon, on Friday, September 25th from 12:30 to 1:30 pm in Room 260, on the second level of the Convention Center. Dr. Maroon will be discussing the impact of fish oil and antioxidants such as resveratrol and green tea on healthy aging. His book The Longevity Factor challenges the current paradigm of aging and reviews the latest and greatest research on ways to live a longer, healthier life. Retailer attendees will receive an additional 5% off show orders by having their order form authorized at the lecture.

• Book Signing: Dr. Joseph Maroon will be signing his newly released book, The Longevity Factor, at Nordic Naturals booth #1135 from 2 to 4 pm on Friday, September 25th. Books are complimentary to the first 200 attendees and all media members.

• New Product Unveiling: Omega-3 Effervescent is a great, new way for kids and adults to take their omegas. Each packet contains 500 mg EPA and DHA and easily dissolves in water. It’s clean on the palate with a stevia-sweetened creamy orange flavor and contains added vitamin D3.

• Cod-Tini Happy Hour: Attendees are invited to stop by Nordic Naturals booth #1135 for happy hour from 4 to 6 pm on Thursday and Friday – receive free samples and souvenirs!

Joseph C. Maroon, M.D., is a board certified neurosurgeon and currently serves as a medical advisor to Nordic Naturals. He has been the team Neurosurgeon for The Pittsburgh Steelers for the last 20 years. H has published over 250 scientific papers, 8 books, and 40 book chapters. Most recently, he has co-authored a study titled, “Evaluation of Lipid Profiles and the use of Omega-3 Essential Fatty Acids in Professional Football” -- a landmark paper in this field.

Distributing products to over 20 countries on all 7 continents, Nordic Naturals is the international leader in omega-3 fish oils and EFA blends. The company has built a strong reputation in the omega fatty acid category by delivering exceptional purity, freshness, taste and demonstrating environmental responsibility. Nordic Naturals has over 150 different fish oil products—including liquids, soft gels, and children's chewables – all in natural triglyceride form. For information, call 800.662.2544 or visit www.nordicnaturals.com.

Kashi Company Spices Up All Natural Frozen Entrees With Exotic Flavor Combinations

Kashi Company, the premier natural food company, today announced that it is expanding its current all natural frozen entree family to include two new exotic flavors: Red Curry Chicken and Veggie Chana Masala. The new varieties combine Kashi's signature 7 Whole Grain Pilaf with unique, ethnic-inspired flavors to offer savory, good-for-you meal options.

"At Kashi, we understand that convenience is important when making food choices, but that doesn't mean you have to sacrifice positive nutrition. Our two new entrees offer more variety to what you typically might find in the frozen aisle--with surprising ingredients including bok choy, kale and edamame," said Keegan Sheridan, natural food and lifestyle expert for Kashi. "We are excited to add adventurous flavor combinations to our existing all natural, frozen entree family."

The new flavor combinations include:

-- Red Curry Chicken: Combining the heat of zesty, Thai red curry sauce over a bed of Kashi(TM) 7 Whole Grain Pilaf with unique ingredients, including fire roasted sweet potato, red peppers, bok choy, bamboo shoots and kale, this entree makes an enticing, spicy meal with exceptional nutrition. This dish offers up tasty, all natural nutrition with 18 grams of protein, 39 grams of whole grains and 7 grams of fiber.

-- Veggie Chana Masala: Experience the tantalizing flavors of a favorite Indian dish with this new vegetarian and vegan-friendly entree. The new Veggie Chana Masala layers a bed of Kashi 7 Whole Grain Pilaf topped with tangy garam masala sauce with chickpeas, red peppers, fire roasted eggplant, carrots and edamame. This tasty recipe provides all natural nutrition including 25 grams of whole grains, 11 grams of protein and 8 grams of fiber.

Kashi(R) All Natural Red Curry Chicken and Veggie Chana Masala Frozen Entrees are now available in retailers' freezers nationwide. For more information, please visit www.Kashi.com.

About Kashi Company

Founded in 1984, Kashi is a company on a mission to redefine how people eat to achieve their best lives. As a pioneering health food brand, Kashi is dedicated to providing great tasting, healthy and innovative foods that enable people to achieve optimal health and wellness. Its products are natural, minimally processed, and free of highly refined sugars, artificial additives and preservatives. Kashi(R) brands include: GOLEAN(R) cereals, bars, shakes and waffles; Kashi(R) Heart to Heart(R) cereal, instant oatmeal and waffles; Kashi(R) 7 Whole Grain Puffs, Honey Puffs, Nuggets and Flakes cereals; Kashi(R) Vive(R) Digestive Wellness cereal; Kashi(R) Good Friends(R) and Kashi(R) Good Friends(R) Cinna-Raisin Crunch(R) cereals; Kashi Mighty Bites(R) cereal; Kashi(R) Organic Promise(R) cereals; Kashi(R) TLC(TM) chewy and crunchy granola bars, fruit & grain bars, soft-baked cereal bars, TLC(R) party and snack crackers, and Kashi(TM) TLC(TM) Chewy Cookies; Kashi(R) All Natural Frozen Entrees; Kashi(TM) All Natural Frozen Pizzas, Kashi(R) Honey Sunshine(R) cereal, Kashi U(TM) and Kashi(TM) 7 Whole Grain Pilaf.

NBJ

$560 Million Energy Shot Market Pumps Up Flattening Energy Drink Sales

 



The brand names—Full Throttle, Monster Hitman and Rockstar—conjure images of rocket engines, athletic prowess and super heroes, and they offer the promise of energy and power for all of those tired and ordinary human beings who want to do more, work longer or simply party all night. These products are all energy shots, and they are the hottest thing in the energy beverage sector since, well, energy drinks. With growth statistics in the triple digits and market sales of approximately $560 million in 2008, according to Nutrition Business Journal estimates, the future looks bright for these little chasers, which have captured the attention of energy seekers in retail channels ranging from drug stores to truck stops.

The emergence of the shot market was so fast that the products seemingly came out of nowhere, at a time when the typically strong energy drink market began showing signs of maturation and softening sales due to the slowing economy. The growth of shots is all the more remarkable because these 2- to 3-ounce beverages also sport a premium price tag, costing up to $3.00 a bottle. As The New York Times noted in its July 2009 story about the soaring popularity of energy shots, at this price “a 20-ounce bottle of Coca-Cola would sell for $30.”

The concept has become so successful that there are currently more than 70 brands on the market—including sales leaders 5-Hour Energy and 6-Hour Power, as well as newer entries from beverage industry heavyweights Hansen, PepsiCo and TheCoca-Cola Co. Most recently, the powerhouse of the energy drink sector, Red Bull, introduced its own shot product in April 2009. But as competition heats up, some brands are beginning to falter, and the metrics for success may shift from marketing power to company credibility and proof of efficacy.

NBJ’s Sports Nutrition & Weight Loss issue, which publishes this month, includes an in-depth look at the energy shot market that features interviews with 5-Hour Energy, 6-Hour Power, Red Bull and other brands operating in the category. To order the issue, subscribe to NBJ or download a free 32-page sample issue, go to go to NBJ’s subscriber page.

Related NBJ links:
Healthy Energy Rounds First; Natural Sports Drinks Up To Bat
Energy Drinks Take a Hit in the Press
NBJ’s Sports Nutrition & Weight-Loss Report 2009


Related Natural Foods Merchandiser links:
Be a Sport: A Primer on Energy Shot Products

NBJ

SNWL sales suffer blow from recession and flurry of negative news events

 


As the U.S. nutrition industry braces itself for increased regulatory scrutiny by the U.S. Food and Drug Administration (FDA) and a potential Congressional attack on the Dietary Supplement Health and Education Act (DSHEA), two sectors of the industry that seem to be garnering a lion's share of the negative attention are the sports nutrition and weight-loss arenas. Both sectors continue to fuel sales growth and product innovation for the industry, but both also have faced numerous FDA warnings, product recalls and the ensuing wave of bad press.

Sports Illustrated magazine's May 2009 cover story exposé on the dangers of sports supplements was one of the more damning articles to come out in recent months. In it, the article's authors David Epstein and George Dohrmann do their best to deliver a knock-out punch to the sports supplement industry and DSHEA, which the writers say is the reason the sports and weight-loss supplement business has become “a Pandora's Box of false claims, untested products and bogus science.” Although the Council for Responsible Nutrition (CRN) and others in the industry decried the sloppy and seemingly one-sided reporting done for the Sports Illustrated piece, it and other recent negative articles reflect the wariness among some athletes and general consumers of the benefits and safety of sports and weight-loss supplements. Case in point: In response to the Sports Illustrated story, Daniel Crummett, MD, a physician in Chapel Hill, North Carolina, wrote to the magazine: “I've become stronger in my conviction that taking supplements is nothing more than a giant crapshoot.”

Along with the economic downturn and resulting squeeze on product development, such negative sentiments are helping to slow sales growth for the overall sector. Nutrition Business Journal research shows that U.S. consumer sales in the sports nutrition & weight-loss (SNWL) category — which we define as including sports supplements, weight-loss meal supplements, weight-loss pill-form supplements, nutrition bars, sports & energy drinks, and low-carb foods — grew 5.2% to $20.8 billion. Although $1 billion in new sales was added to the SNWL category in 2008, its overall growth rate slowed from 7.8% in 2007 and 9.7% in 2006. In fact, last year's SNWL expansion of 5.2% was the lowest annual growth rate the category has experienced since NBJ began reporting on the market in 1997. Nutrition bars and weight-loss meal supplements were the only SNWL segments to post higher growth last year than in 2007.

Given the continued challenges associated with the economy, NBJ is forecasting even slower sales expansion for the SNWL category moving forward. We expect to see less than 1% SNWL growth in 2009 and, provided the economy continues to show signs of improvement later this year, 4% to 5% growth in 2010. Beyond the economy, the greatest challenge facing the SNWL sector is winning back the credibility it has lost with consumers, the media and even lawmakers over the last 24 months.

Many of the companies interviewed and surveyed for this NBJ issue agreed that the SNWL industry is currently facing some serious credibility issues that could hamper sales down the road. When asked to list the most critical issues facing the SNWL industry in 2009, many of our 80-plus survey respondents cited false or misleading product claims, the lack of research to prove product safety and efficacy, and a general lack of trust among consumers.

The rub for the industry is that many believe the actions of a few irresponsible companies are threatening everyone's future. In fact, 66 out of 81 survey respondents said they agree or strongly agree with the statement that the “reputation of the SNWL industry is being spoiled by only a few ‘bad apples.’”

When asked whether they believe “SNWL products are more closely scrutinized for claims than other supplements or health foods,” 55 out of 80 respondents said they either agree or strongly agree with that statement.

SNWL's Growing Mass Appeal

Although the sports nutrition industry was born in the niche world of bodybuilders and other hardcore sports enthusiasts, these products — along with their weight-loss supplement counterparts — have moved mainstream. In fact, Wal-Mart and other mass market retail outlets continue to generate the vast majority of SNWL sales. In 2008, the mass market channel captured 68% of U.S. SNWL sales, which grew 5% to $14.2 billion within the mass channel last year. Among the best mass market sellers in the SNWL category are products that appeal to a broad range of mainstream consumers, such as weight-loss pill-form supplements, weight-loss meal-replacement supplements, nutrition bars, sports & energy drinks, and low-carb foods. According to NBJ estimates, 94% of sports & energy drink sales are generated in the mass channel, particularly at convenience stores.

In comparison, sports supplements — which continue to be geared toward bodybuilders and endurance athletes — are predominantly sold at specialty stores. In fact, more than half of sports supplement sales were rung up in the natural & specialty channel last year.

U.S. consumer sales of all SNWL products within the natural & specialty channel — which includes GNC, Max Muscle, Vitamin Shoppe, Whole Foods Market and independent sports nutrition retailers — grew 6.8% to $3.3 billion last year. The natural & specialty channel generated 16% of total SNWL sales in 2008, and it continues to serve as a gateway to the potentially more lucrative mass market retailers. “The proving grounds on the sports side are the specialty retailers,” said Ryan HornBuckle, a sports nutrition consultant and former GNC retailer. “If you prove yourself at GNC, Wal-Mart might take you in.”

Sports and weight-loss supplements continue to represent important sales drivers for GNC, Beth Kaplan the company's president and chief merchandising and marketing officer, told NBJ. She said GNC is working to “feed” the sports nutrition category with the introduction of more of its own products — such as its new Pro Performance AMP line, which caters to competitive athletes and hardcore bodybuilders with clinically studied protein products, nitric-oxide stimulants and other sports offerings. She declined to offer specific sales numbers, but Kaplan said GNC is “pleased with AMP's reception by our sports nutrition customers.” Sales of this and other sports nutrition products helped to mitigate the losses GNC experienced earlier this year after Iovate Health Sciences recalled 14 of its Hydroxycut weight-loss supplements in May. Still, the recall did stifle GNC's second quarter 2009 sales growth, which slowed to 2.3% over the same quarter in 2008. As GNC CEO Joe Fortunato noted during the company's Q2 earnings call, the retailer's same-store sales would have been up 3.8% had it not experienced the recall and related lost sales. [Editor's note: For more on the Hydroxycut recall, see story starting on page 9.]

Education Boosts Online, MLM Sales


Although it generated only 3% of total U.S. SNWL sales last year, the Internet is still the fastest-growing sales channel for this (and all other) nutrition industry categories. According to NBJ estimates, SNWL sales via Internet e-commerce sites shot up 24% to $580 million in 2008. The community and education components of Internet sites such as Bodybuilding.com are helping to attract and retain consumers, who are increasingly opting to purchase their sports supplements and other SNWL products online. Kevin Lawrence, president and CEO of BioNutritional Research Group Inc. (BNRG), maker of the PROTO WHEY brand of hydrolyzed whey protein powder and Power Crunch nutrition bars, said he believes Bodybuilding.com's efforts to educate online shoppers about the general characteristics and benefits of various sports nutrition and weight-loss products is helping the entire industry. “The guys at Bodybuilding.com are building a tremendous education site, and that is a great thing for the consumer,” Lawrence said. “If more Websites did that, we all would benefit.”

Sports nutrition & weight-loss products have long been a staple for multi-level marketing (MLM) companies, which can use their armies of sales associates to educate consumers about the sometimes complex benefits of SNWL offerings. “The network-marketing channel is a great place to bring more advanced concepts to people because you have more time to explain things than you do in a retail setting,” said Robert Sinnott, PhD, senior vice president and global chief science officer at Mannatech.

Sinnott said Mannatech is finding its global MLM channel to be a good fit for its new OsoLean whey protein blend, which incorporates a new protein peptide technology and is marketed as helping the body burn fat while maintaining lean muscle. “It would have been difficult to take this product to market through a retail channel because the technology behind it is new,” Sinnott said. Released in 2008, OsoLean is already “doing wonders” for Mannatech's Optimal Weight and Fitness line and is a top-selling SKU globally, Sinnott said.

In 2007, Mannatech decided to bulk up its Optimal Weight and Fitness offerings by developing new products such as OsoLean. “There wasn't and still is not a clear leader in the weight and fitness categories, so we felt there could be gains made by releasing a few good products in these areas,” Sinnott said. Along with OsoLean, Mannatech is seeing increased interest in its BounceBack product, which was designed to reduce muscle pain and tenderness following physical activity. “BounceBack is an inflammation-control product that was developed for Baby Boomers but has crossed over to elite athletes through word of mouth,” Sinnott noted. Overall, Mannatech's Optimal Weight and Fitness category is experiencing double-digit sales growth in 2009, said Sinnott, who added that, as of August, the category's sales had already exceeded those achieved in all of 2008.

MLM companies such as Mannatech and Herbalife rung up 8% of total U.S. SNWL sales in 2008, but sales grew less than 1% to $1.74 billion for the channel last year, according to NBJ research.

Reaching SNWL Consumers Through New Channels

Sales of SNWL products within the practitioner channel, which includes health clubs and gyms, increased 4% to $480 million in 2008. As NBJ explored in our 2008 Sports Nutrition & Weight-Loss issue, nutrition is becoming a greater focus for the fitness industry. As a result, health clubs and gyms throughout the United States are pumping up their sales of nutrition bars, ready-to-drink mixes and sports nutrition products.

But, according to Peter Rottier, vice president of the growth equity firm Summit Partners, the potential for nutrition-related product sales at fitness centers goes well beyond the standard energy bar or protein powder. “I'm seeing some interesting trends that point to a growing consumer need for dietary planning services and customized meal programs,” said Rottier. Summit Partners, which made a minority equity investment in the rapidly growing health club franchise Snap Fitness Inc. in June 2008, is currently exploring ways to incorporate meal planning into Snap's offerings as a way to provide added value to and extract more revenue from the more than 500,000 people who have joined the 1,000 Snap clubs in operation throughout the United States. “We are not in the food business, so we would offer these services through partnerships,” Rottier added. “Snap provides a perfect distribution platform for any specialized company within the health and wellness space.”

Lindora, which operates 43 medical-based weight-loss clinics throughout California (including within nine Rite Aid stores) and recently received a growth investment from Presidio Investors, sells dietary supplements and other nutrition products that have been clinically proven to support healthy weight loss, said Lindora CEO Cynthia Stamper Graff. “A product must be efficacious or we won't include it in our offerings. Our objective is to include whatever we can that will help provide a better outcome for our patients.” Among the more than 50 private-label products sold on the Lindora Website and within the company's clinics are a wide range of meal-replacement drinks, protein bars and snacks, and protein-rich soups and other meals. Lindora also sells dietary supplements including multivitamins, omega-3 capsules and calcium chews. “Our most popular products are the nutrition bars because of the convenience factor,” Stamper Graff said.

The majority of Lindora's products are sold within the company's clinics. “Customer education is an important component of our product sales,” Stamper Graff said. “Our nurses and medical providers talk to patients and recommend supplements and other products that will meet their specific needs.” Lindora is always on the lookout for new offerings and is currently considering digestive enzyme and probiotic and prebiotic products to add to its portfolio, Stamper Graff said. Proof of research, label accuracy and quality control are all things Lindora looks for when evaluating new products, she added. “If we are putting our name on it, we want to know that the quality and safety are there.”

Sports Supplement Sales Still Strong, But For How Long?

U.S. sales of sports nutrition supplements — which include a wide range of products designed to do everything from improving aerobic performance to increasing muscular endurance to building lean muscle mass — jumped 6.8% to $2.7 billion in 2008, according to NBJ estimates. This was slightly higher than the 6.2% growth the overall $25 billion U.S. dietary supplement market saw in 2008 but lower than the 8.4% growth the sports supplement segment experienced in 2007. Powders/formulas generated 85% of sports supplement sales last year, while pills made up 6% and ready-to-drink (RTD) and hardcore drink products made up 9% of sports supplement sales last year.

Sports supplements continue to be an important contributor to overall SNWL sales growth. In 2008, the segment added $173 million in new sales dollars, making it the second-largest SNWL growth segment, after the sports & energy drinks segment (which includes increasingly popular energy shot products). Sales of RTDs and hardcore drinks such as CytoSport's Muscle Milk RTDs grew 10.5% to $251 million in 2008.

The Internet is an increasingly important channel for sports supplement sales, which increased 50% to $231 million via Internet sites such as Bodybuilding.com and Musclemaster.com in 2008. These and other e-commerce sites generated 9% of total sports supplement sales last year, making the Internet the fourth-largest sales channel for sports supplements behind natural & specialty retail, mass market retail and MLMs.

Innovation, But At What Price?


In recent years, the sports supplement segment of the SNWL market has experienced some of the most vibrant product innovation, and this has led to explosive growth for many sports supplement companies including EAS, BSN and Universal Nutrition. Proven ingredients such as creatine and more recently beta-alanine have created entirely new product categories and sales opportunities for companies. For example, First Endurance, which makes sports supplements geared toward endurance athletes, introduced an upgrade version of its flagship product Optygen in 2008. Branded OptygenHP, the new product contains 1,000 mg of beta-alanine per serving to increase muscular endurance, boost strength, improve exercise capacity and delay muscle fatigue. “Since its introduction, OptygenHP has become our number one selling product,” said Michael Fogarty, vice president of sales and marketing at First Endurance. Beta-alanine — which is a non-essential, naturally occurring amino acid — was added to OptygenHP because of the growing base of clinical research supporting the ingredient. “First Endurance's competitive strategy is based on having the best formulations, technologies and delivery systems available. Because of this, we spend a significant amount on research and testing. We don't worry about price points when developing products. The only goal is to develop the best endurance products available.”

Still, some believe innovation within the sports supplement market has come with a heavy price, in that it has motivated some companies to create products that are not backed by the necessary safety and efficacy studies and that, in some cases, are designed to act as steroid prohormones — which, once ingested, are converted to anabolic steroids in the body. Numerous sports supplements have been found to contain banned substances such as steroids, stimulants and beta blockers. “The sports supplement industry was born in the golden age of health and fitness but for some it has mutated into seeing how close they can get to creating products that produce drug-like effects,” HornBuckle said.

It's this side of the sports supplement industry that was in the crosshairs of the May 2009 Sports Illustrated article, What you Don't know Might Kill You. In it, the magazine brings up examples of professional players being punished for using supplements spiked with banned substances and talks about the “fertile ground” the industry has created for “kitchen chemists with little or no formal education in science and nutrition.” It also focuses on several sports supplement retailers and product developers who reap riches from selling and concocting stimulant-filled products that can be sold “with no proof of effectiveness or safety, and without approval from the FDA.” Their story goes on to talk about how GNC salespeople are paid commission by sports supplement manufacturers to push their products on “unsuspecting customers” who “are sometimes steered to a supplement that is inappropriate for their needs.” It ends with a discussion of sports supplement companies manipulating the findings from clinical research or rigging the studies altogether. Taken as a whole, the article paints a grim portrait of a rogue sports supplement industry. But how accurate is this portrayal?

In a five-page response to the article, the industry trade group CRN blasted Sports Illustrated for getting the facts wrong on the size of the U.S. sports supplement industry (the piece incorrectly cited NBJ data to say that sports supplements represent a “$20 billion obsession”), for painting a one-sided story on the dietary supplement industry, and for misrepresenting the facts surrounding DSHEA. “The supplement industry, including sports nutrition supplements, has a strong safety profile, and consumers value the benefits these products can provide,” CRN President and CEO Steve Mister wrote in CRN's response to Sports Illustrated. “The entire supplement industry sells billions of bottles of products in a year, and yet for the first full year that the mandatory serious adverse event reporting system for supplements was in existence, FDA received only 1,080 total adverse event reports, 672 of which were considered serious.”

Others NBJ spoke to agreed that the picture painted by Sports Illustrated was one-sided. “I am proud of being in this industry because the industry as a whole is solid and well over 80 percent of companies are producing good products and have the interests of consumers at heart,” said BNRG's Lawrence. “But, we are not unlike other industries, where there are some companies that care only about earning a profit as quickly as possible and don't care how they do it.”

Anthony Almada, founder and chief scientific officer at IMAGINutrition and a member of NBJ's editorial advisory board, said he believes Sports Illustrated's portrayal of the sports supplement industry was “unfortunately very accurate” — in large part because it is simply too easy for anybody to sell supplement products, even those that are backed by absolutely no research. This, he said, makes the road that much more difficult for responsible companies that do invest in human clinical studies and prioritize safety and efficacy over making a quick profit. “It negatively impacts perception and fosters skepticism so that even when you have studies people say, ‘I don't believe them,’” said Almada, whose sports nutrition company GENr8 earmarks 3% to 5% of its top-line revenues to research and uses only independent university labs to conduct the human clinical trials for its products.

Almada said he welcomes stricter enforcement of current supplement regulations and even more government oversight if it means the industry's products are supported by better science and marketed without the use of unsubstantiated claims. BNRG's Lawrence said he hopes to see more industry self-policing and the creation of rating or certification programs that would help consumers make more informed purchases when shopping for sports supplements and other nutrition products.

Scott Connelly, MD, the founder of MET-Rx who is now selling a new sports supplement under the brand Progenex SRG, is the one sports supplement creator who was described in a positive light by Sports Illustrated — largely because of the research that went into MET-Rx and now is being conducted for Connelly's new product. Based upon mammalian milk, Progenex SRG has been tested in human muscle cell cultures, with animals and in human clinical trials. Initial studies show the product can accelerate recovery from exercise-induced muscle damage. “I feel comfortable about all claims I make for my products because I go through the rigor needed to make those claims,” Connelly told NBJ.

Sports and Energy Drinks Up 7%


U.S. consumer sales of sports & energy drinks once again fueled much of the growth in the SNWL industry in 2008. According to NBJ estimates, sales in this segment grew 7% to $10.8 billion last year. The segment added $700 million in new sales dollars, which were largely generated by the fast-growing energy shot market. Sports & energy drinks accounted for 52% of the total SNWL market last year.

Energy shots, which already make up 5% of sports & energy drink sales and are expected to double their market share in 2009, are the big news in this SNWL segment. Although the energy drink market itself has experienced explosive growth for many years, the emergence of the shot market has dampened sales of energy drinks while boosting the segment as a whole. [Editor's note: For more on the energy shot market, see story starting on page 17.]

Along with shots, other trends in the energy drink sector include the removal of taurine — a popular but controversial energy-enhancing ingredient — from some products and the creation of organic energy drinks, such as the new super-fruit drink created by Borojo LLC. Launched this year, Borojo is certified organic, caffeine free and made from the South American super fruit borojo, which is said to produce a natural energy kick.

Sales of Gatorade and other sports drinks were nearly flat in 2008, growing a mere 0.5% to $5.36 billion. Gatorade continues to own the largest share of the sports drink market, though its sales were slightly down in 2008. Like dietary supplements and some other nutrition products, sports drinks could profit from consumers' growing interest in health and wellness and their changing spending habits. “The economy has caused people to move away from highbrow purchasing habits, so you see them buying fewer fu-fu coffee drinks at Starbucks and turning to exercise and weight loss,” said James S. Tonkin, principal of Healthy Brand Builders. “That is one of the things benefiting the sports drink sector.”

Low-Carb Sales Stabilize

Sales of low-carb products have been falling so quickly since their heyday in 2004 that NBJ has considered dropping this segment from the SNWL category altogether. That said, sales of low-carb products began to stabilize in 2008, dropping less than 1% to $1.2 billion. Data from Information Resources Inc. shows that sales of Atkins Nutritionals' products and of Michelob Ultra, two top-selling low-carb brands, were both up in 2008. Low-carb diets in general, however, still generate negative press, much of which is driven by research into the health effects of carbohydrate-restricted eating. For instance, in August 2009, Harvard researchers published a study showing that low-carb, high-protein diets can clog arteries and may increase the risk of heart disease and stroke.

NBJ Web-Only Content: SNWL

Nutrition Business Journal subscribers can find even more content related to the sports nutrition & weight-loss industry on the NBJ Website. Go to www.nutritionbusinessjournal.com to read a Q&A with Scott Connelly, MD, the founder of MET-Rx who has developed a new sports supplement based on dairy science research under the brand Progenex SRG. NBJ talks to Connelly about the science behind his new product and his concerns about the current state of the sports supplement industry.

NBJ

Shot products offer a burst of growth and innovation for maturing energy drink sector

 

The brand names — Full Throttle, Monster Hitman and Rockstar — conjure images of rocket engines, athletic prowess and super heroes, and they offer the promise of energy and power for all of those tired and ordinary human beings who want to do more, work longer or simply party all night. These products are all energy shots, and they are the hottest thing in the energy beverage sector since, well, energy drinks. With growth statistics in the triple digits and market sales of approximately $560 million in 2008, according to Nutrition Business Journal estimates, the future looks bright for these little chasers, which have captured the attention of energy seekers in retail channels from drugs stores to truck stops.

The concept has become so successful that there are currently more than 70 brands on the market — including sales leaders 5-Hour Energy and 6-Hour Power, as well as newer entries from beverage industry heavyweights Hansen, PepsiCo and The Coca-Cola Co. Most recently, the powerhouse of the energy drink sector, Red Bull, introduced its own shot product in April 2009. But as competition heats up, some brands are beginning to falter, and the metrics for success may shift from marketing power to company credibility and proof of efficacy.

Shots Stimulate Sales Growth

The emergence of the shot market was so fast that the products seemingly came out of nowhere, at a time when the typically strong energy drink market was showing signs of maturation and softening sales due to the slowing economy. The growth of shots is all the more remarkable because these 2- to 3-ounce beverages also sport a premium price tag, costing up to $3.00 a bottle. As The New York Times noted in its July 2009 story about the soaring popularity of energy shots, at this price “a 20-ounce bottle of Coca-Cola would sell for $30.”

The phenomenon has beverage industry experts shaking their heads and wondering how far this can go. “They started as mixers for young adults in clubs, but now it is much bigger,” said John Sicher, editor-in-chief of Beverage Digest magazine. “Now they are used by students, truck drivers and office workers as a pick-me-up in place of coffee. [Whether the shot market] will grow a bit bigger or a lot bigger, it's too early to tell.”

At any rate, shots are the fastest-growing product segment in the energy category, according to Don Longo, editor-in-chief of Convenience Store News magazine. He noted that the growth of shot product sales in convenience stores — the primary sales channel for energy shots — is indicative of the market overall. “If you look at Nielsen point-of-sale data [in convenience stores] for the first six months of 2009, shots are up 120 percent,” Longo said. “But you also have to remember that they are growing from a much smaller base than energy drinks.” The $4.9 billion energy drink category experienced double-digit growth for several years before flattening out in 2008, according to NBJ estimates. This was due in part to the high price of energy drinks coupled with reduced discretionary spending.

Shots Vs. Drinks

So what do shots have that drinks don't? The concept is pretty simple. Shots typically provide some combination of caffeine, amino acids and an assortment of vitamins that offer an energy boost without the 8 or 16 ounces of liquid, the extra calories or the added sugar that causes a “crash” for many energy drink users. A few provide herbal ingredients, such as guarana, green tea and Asian ginseng. All of this comes in a convenient package that fits neatly into a purse, gym bag or briefcase. Unlike other drinks, however, shot products are not purchased for their taste profiles. In fact, as The New York Times noted, many of these products taste so bad that “most people hold their noses and drink [them] down in a single gulp.”

Otherwise, the shot concept is basically a new spin on coffee. The main ingredient that produces an effect in most of these products is caffeine, explained Anthony Almada, president and chief science officer of sports nutrition think-tank IMAGINutrition. But, he added, few companies say how much caffeine the products really contain. “They all say shots contain about the same caffeine as a cup of coffee, but consumers have to put this in perspective,” he said. Shots often contain synthetic caffeine, which does not have the natural inhibitors present in coffee, and will likely have a much more concentrated effect than the same or greater amount in a cup of coffee.

Furthermore, Almada noted, few shot products have been tested in their actual form for efficacy or safety. One that has been tested is iSatori Technologies' Hardcore Energize Bullet, launched in 2007. “A lot of the two-ounce shots claim to provide sustained energy for four to seven hours, but they have no published studies to prove that,” noted iSatori CEO Stephen Adele. The company's Hardcore Energize Bullet features a combination of half regular caffeine and half microencapsulated caffeine, which provides a sustained release of energy that has been proven to work in independent clinical studies.

Proven or not, the shot concept has taken hold with a new group of consumers who were not primary energy drink users, noted James S. Tonkin, principal of Healthy Brand Builders, a beverage industry consultancy. Originally two primary consumer groups existed for energy shots. The first group was made up of students who need to cram for tests and the young party animals mixing shots with cocktails to party all night. The second group included the nightshift workers, such as truck drivers and nurses. “But now shots are even going into the office environment, where workers are looking for an afternoon boost,” Tonkin explained.

Helping to boost the overall appeal of energy shots is their ability to help people deal with an increasingly demanding work environment, said Karen Finnocchio, director of marketing for NVE Pharmaceuticals, whose flagship brand 6-Hour Power is widely seen as the No. 2 product in the energy shot category, behind 5-Hour Energy. “The work place is changing — it is more stressful. People are doing longer shifts and working odd hours,” Finnocchio said. “They are tired and they need energy.”

The company that can take credit for first positioning shots to the ordinary office worker is Living Essentials. Its product, 5-Hour Energy, is the undisputed sales leader and pioneer in the category. The product was launched in 2004 after company founders tried an energy drink and found the effect interesting. The company's R&D team began analyzing the idea and came up with the unique shot concept. It was a new delivery system that appealed to both retailers and consumers, said Carl Sperber, director of corporate communications at Living Essentials. “The reasoning behind this was that it was small and convenient and quick for the consumer,” he explained. “We asked the question: Are people thirsty or do they need energy? We started analyzing it and thought maybe people don't want to slog through eight ounces. And for the retailers, we helped them bring a hot retail category out from the back cooler to the impulse area of the store near the register,” Sperber added.

Creating Category Magic


The win-win combination was consumer packaged goods (CPG) magic. GNC was the first retail chain to pick up the 5-Hour Energy product, which hit stores in September 2004. The retailer helped Living Essentials, which was a very small, resource-challenged company at the time, track sales. Despite being backed by no advertising or promotion, initial sales of 5-Hour Energy were encouraging enough to convince Living Essentials to ramp up the product's marketing and distribution, Sperber said. “We never imagined where it would go. And we were very fortunate that everything we did worked. That is rare in the CPG world.”

Currently, 5-Hour Energy commands a 60% share of the energy shot market and generated an estimated $280 million-plus in sales for the 52 weeks ending July 11, 2009, according to Nielsen Scantrack data for both convenience stores and food, drug and mass (FDM) retailers.

Sperber believes the product's on-going success is driven by a simple idea: target those consumers who need an energy boost the most. Many energy products are targeted to teenage boys through extreme sports, he said, “but the people who really need energy are working folk, and they don't identify with brands that have freak or monster in the name. This is a no-nonsense product that won't disrupt your schedule, and [consumers] are comfortable with it.”

Although 5-Hour Energy is the clear market leader, a number of follower brands — including 6-Hour Power and the recent entries, such as NOS Power Shot from Coca Cola, Monster Hitman from Hansen and Red Bull's Energy Shot — are vying for position in both convenience stores and FDM channels. In convenience stores alone, 5-Hour Energy saw growth of 2.1% on sales of $224 million, for the 52-week period ending July 11, 2009, according to Nielsen data. Most of the category growth, however, is occurring in the FDM channel, where 5-Hour Energy is up 19.7%, on sales of $59.7 million, according to Nielsen data for the 52 weeks ending June 27, 2009. During the same period, Monster Hitman was up 114% on sales of $653,000 and Coke's NOS Power Shot was up 27% on sales of $1 million.

The Cannibalization Effect

The danger of this strategy may be that energy drink users could switch to shots altogether. However, Sicher believes there is little worry about significant cannibalization of energy drinks. “Shots are probably getting some trial use from energy drink users.” But, he added that the products really have different functions. “Energy drinks taste good and are fun to drink,” he said. “Shots are good for a quick pick-me-up. If someone is driving long distance, and they need a pick up, shots are an efficient way to get energy and also preclude frequent bathroom stops.”

Red Bull, which launched its much anticipated shot product in June of this year, specifically says its shot is a natural extension of the portfolio and will bring incremental business. With a suggested retail price of $2.79 in convenience stores and $2.49 in grocery stores, the shots are essentially a concentrated version of the original drink, with a combination of amino acids (taurine), carbohydrates, caffeine (80 mg) and B-vitamins in a 25-calorie version and a sugar-free 2-calorie version. A company spokesperson said Red Bull entered the category after it conducted consumer feedback and trade research indicating its customers were waiting for a trusted premium brand like Red Bull to enter the shot segment. The category is “driving new users to energy products and increasing usage occasions without cannibalizing existing business,” said Patrice Radden, a Red Bull spokesperson. Though the company would not comment on sales performance of the shots, it did say it hopes to soon have full national distribution via convenience, grocery and drug retail channels.

Recent Nielsen data shows the Red Bull shots have posted solid growth since their launch, while other top brands are starting to see losses. For example, data from convenience stores for the 52 weeks ending July 11, 2009, showed 6-Hour Power down 4.8% on sales $19.9 million, and NOS Power Shot down 5% on sales of $15.8 million. These falling sales likely reflect the entrance of new shot products, such as Red Bull's Energy Shot, and the limited ability for gas stations and other convenience outlets to promote and prominently display more than a few energy shot brands.

The fact that it is becoming increasingly difficult for newer or second-tier brands to distinguish themselves is adding to the confidence of the category's leaders. “There are lots of new brands on the market, but not much real competition,” said Living Essential's Sperber. He added that he is not sure why some of the newer brands have not gotten the expected traction in the market. He speculated that one reason is these brands mean energy drink to consumers, yet shots are smaller in size and value and cost more than the can in the cooler. In the end, “energy shots offer an opportunity for companies that know what they are doing. But it is a different consumer and a different retail channel,” Sperber added.

A Shots Shakeout

Those watching the category closely see these factors as the start of a brand shakeout and consolidation that will put increased emphasis on points of differentiation and efficacy. The increase in brands and, particularly, the entrance of big brands is causing consumers to split the dollars they spend between products, so this is raising the bar for success, noted iSatori's Adele. The category is getting tougher, and you can't be just marginally better, he added. “There are lots of me-toos coming out in small bottles, and they are not making it,” Adele said. Adele believes that the Hardcore Energize Bullet brand has what it takes to succeed, with both consumers and retailers, because of its proven formula and because of its patented test-tube-like packaging that is clear and shows the liquid inside. He noted the product offers both “talkability” and a “coolness factor” that its competitors don't inspire. The formula seems to be working. The Hardcore Energize Bullet was recently named one of the top 10 shot brands in North America by AC Nielsen.

Despite the mixed reviews of some newer brands, more new shots are entering the market every day, according to NVE's Finnocchio. The company not only produces 6-Hour Power, but also manufacturers many other leading shots on a contract basis. Finnocchio noted that her company is seeing a huge ramp up of requests to manufacture shots. “Honestly, I think everyone is trying to carve a niche in the market, and they must find ways to get people interested, because it is difficult to get products placed, but it's even more difficult to get it moving off the shelf,” she said.

That may be one reason why retailers are starting to cut back on the shot products they carry. According to Adele, iSatori's product has survived several cuts by convenience retailer 7-Eleven, which is finding that it has only so much room at the register for shot products. “Cash raps and small displays are not enough to hold the category,” added Tonkin of Healthy Brand Builders. “Eventually,” he predicted, “retailers may have to develop additional space to sell shots in the store.”

But, as Adele reiterated, shots do best at the checkout counter of convenience stores, gas stations, gyms and general sporting goods, and there is not room for 70 products at the counter. “Shots are really a convenience impulse purchase,” he said. “Adding shelf space is an interesting concept, but I don't think it will happen.” Rather, Adele sees the category evolving much like chewing gum. “There may be 15 to 20 SKUs, but only about five to six brands,” he said.

In the current retail environment, distinguishing a point of differentiation from the pack will grow in importance, Finnocchio noted. Efficacy, taste and sugar-free are all attributes that consumers want, but a company will also need to be reputable to earn the trust and dollars of consumers, she added. This is a point that Adele is betting on for the future. “One of our core values is that we don't borrow someone else's science and then suggest our product will work the same,” he said. “We perform independent trials that are published and presented to prove our products are safe and do what we say they'll do.”

These issues aside, most see the category going strong for several more years. “If you have a good brand and a unique twist or formula then shots will be a good extension to make,” said Finnocchio. Tonkin sees the category morphing from being focused on energy to including secondary shots geared toward specific conditions. “There are a lot of different conditions they could address from heart health to diabetes to gut health,” added Tonkin, whose company is launching an immune-support shot product under the brand Coremune later this year. The product will feature the natural ingredient Wellmune. “The good news is that people are realizing that shots are just another way to get a good tasting, efficacious dose of a condition-specific remedy,” Tonkin added.