“Why do these supplements cost so much?”
It’s a question natural products retailers had better be prepared to answer, in an age when the economy is weak and big-box and Internet stores are increasingly giving traditional supplement sellers a run for their money.
Natural foods stores and other specialty supplement sellers still ring up the majority of supplement sales, but that could change in the not-too-distant future. According to Nutrition Business Journal, supplement sales in the natural channel grew 4.7 percent to $10.3 billion in 2010, while the mass market channel posted sales of $8.2 billion, a 4.8 percent increase from the previous year. Meanwhile, online supplement sales are soaring and expected to surpass $3 billion by 2017, NBJ reports.
It’s no wonder comparison shoppers have questions when it comes to supplement prices: A bottle of 250 private-label calcium tablets from big-box store X can cost as little as $9, while consumers might pay more than three times that for the same number of doses from an established brand at a neighborhood health food store. When it comes to multivitamins, the price span can be even more dramatic, with a one-month supply of an organic, liquid multivitamin costing about the same as 500 days worth of generic store-brand tablets from a mass merchandiser.
Sure, larger stores have economies of scale working to their advantage. And smaller retailers have to invest more in knowledgeable staff, money they have to recoup—at least in part—via higher supplement prices. But set those variables aside and supplement industry experts agree: When it comes to dietary supplements, you get what you pay for—at least most of the time.
“This is one of those industries where there is just no such thing as high-quality, low-price,” says Paul Jacobson, CEO of Thorne Research Inc., which makes supplements for the practitioner channel and select pharmacies. “If consumers want pure, quality ingredients, they have to pay a little more.”
As natural products retailers, you know this. Here’s information that can help you explain to your customers why your supplements might cost more than others they find online or at mass market retailers.
Transparency isn’t cheap
Third-party-testing organization Consumerlabs.com estimates that as many as one-quarter of dietary supplements are adulterated in some way, meaning they’ve been diluted or spiked with ingredients not listed on the label. In recent years, bilberry eye-health supplements have been watered down with carcinogenic dyes, palm oil has been passed off as saw palmetto for prostate health, and the joint health stalwart chondroitin–considered the poster child of supplement adulteration—has been adulterated with cheap gummy compounds and synthetic polymers.
How do retailers make sure they are stocking their shelves with the real thing? They must buy from a manufacturer that knows and trusts their supply chain, and often that costs money, says Larry Kolb, president of U.S. operations for TSI Health Sciences, which specializes in botanicals and joint supplement ingredients.
Manufacturers who bypass this step can save on input costs, but they also risk using ingredients that do not meet quality standards. “A number of ingredient companies in this space are able to offer very low cost ingredients because of the lack of trace-ability and the lack of integrity of their raw materials,” says Kolb, who notes that TSI cannot—nor does it attempt to—compete with such ingredient suppliers on price.
Rather than buying inputs from the lowest bidders on the open market and passing them through to manufacturers to bottle and sell, TSI employs a team of auditors that rigorously screen raw material suppliers in China—where a vast amount of supplement ingredients are made. TSI also uses state-of-the-art testing to verify that those materials are what they say they are, and the company even makes its own chondroitin sulfate at a TSI-owned, state-of-the-art manufacturing facility in China.
Third-party-ingredient screening is another quality-assurance tool that adds to a supplement product’s final price. Scott Steinford, president of ZMC-USA, a supplier whose ingredients can be found in roughly 30 percent of supplements on retail shelves, notes that his company has paid well into the six-figure range to earn ingredient verification from the U.S. Pharmacopeia (USP), a third-party stamp of approval that its manufacturing plant has been inspected and its ingredients are what they say they are.
As Steinford sees it, retailers—and their customers—are best off paying a bit more for this level of transparency and quality than risking selling—and ingesting—low-quality, questionable products. “It is in the consumer’s best interest for retailers to thoroughly investigate the supply chain behind the supplements they carry and determine if ingredient selection is purely price driven,” says Steinford.
Branding ingredient quality
Doug Kalman, PhD, a supplement researcher with Miami Research Associates, says that products containing patented, branded ingredients also tend to cost more—usually because the companies behind those brands have invested in research to assure that that their specific strain or compound, manufactured in their specific way, actually works. “It’s like when you buy a computer with Intel inside, rather than just buying something generic,” he says. “You are getting a reproducible experience.”
For instance, products containing FloraGlo, a purified form of lutein shown in numerous clinical trials to improve macular pigment density and possibly slow age-related eye disease, can cost more than twice as much as big-box brands containing generic lutein.
Thorne’s new Meriva-500 curcumin supplements, made with Indena’s patented curcumin ingredient Meriva, are said to be manufactured in a way that—according to some research—makes them 20 times more bioavailable than other curcumin preparations. They also cost about $8 more for a bottle of 60 softgels than conventional store brands.
Digestive health products containing Ganeden Biotech’s patented BC30 probiotic strain (shown in numerous trials to survive both manufacturing and stomach acid better than other strains) also tend to cost more, notes Kalman. (Sustenex is one brand that contains BC30).
“You are going to pay a little more for it, but you know you are getting a real ingredient that has undergone studies in the United States for proof of efficacy,” he says.
The source of an ingredient can also affect price: For instance, glucosamine derived from shark costs far more than those from bovine sources (which in the past have raised concerns about Mad Cow Disease). Calcium carbonate is cheap and widely available, but some research shows that other forms—such as the more expensive calcium citrate—may be better absorbed.
Other factors to consider
Jacobson notes that the way a supplement is manufactured can also impact its price, and quality. For instance, tablets tend to cost less than capsules but come with their downsides.
“With a tablet you can put in lots of binders and fillers. They tend to be cheaper to make, but also harder to digest,” he says, noting that Thorne uses only capsules for its products.
Even in the production of capsules, the use of additives such as magnesium stearate, lactose and dextrose to hasten the manufacturing process can often inadvertently hamper bioavailability or even aggravate allergies. (Thorne products are all hypoallergenic.)
In contrast, liquid supplements tend to be the best absorbed, but also the most expensive, says Ken Whitman, president of Natural Vitality, which produces supplements in liquid and water-soluble powder form.
In some cases, as with vitamin E, natural sources have been shown to be more bioavailable and cheaper synthetic sources are suspected of possibly aggravating health problems.
Using freeze-dried fruits and vegetables, (which tend to maintain their nutritional value better than drum dried) can also cost more, as can using organic or non-GMO ingredients, notes Whitman.
“In our Organic Life Vitamins, we use organic materials whenever possible from our fruit and vegetable blends to our glycerin,” he says. “The price increase just for using organic glycerin is four times that of non-organic glycerin. The fruit and vegetable blend is at least double if not triple the cost of conventional and the organic flavoring is at least double.”
High price does not mean high quality
All that said, experts agree that a high price tag does not automatically infer high quality. Some manufacturers expect higher profit margins than others and, thus, jack up their prices. Others benefit from economies of scale or vertically integrated manufacturing systems and are able to keep their prices lower as a result.
And for some companies, marketing itself drives up the price, notes Kalman.
His advice to retailers: Ask lots of questions of your manufacturers about what goes into their pricing, and always be suspicious of ultra-cheap offerings.
“To me, anything that is less than $10 for a month’s worth of product makes me wonder about the quality of ingredients going in there,” he says. “If it sounds too good to be true, it probably is.”