Hanson has a long history in the marketing of dietary supplement ingredients and finished products. He managed the FloraGlo Lutein brand at Kemin, and more recently worked with companies as consultant through his firm Grip Ideas. Hanson has developed a deep set of connections in the industry, which led to his recent naming as Senior Advisor to investment firm Columbia West Capital, based in Scottsdale, AZ.
Supplement outlook strong
The effects of the actions of New York Attorney General Eric Schneiderman in 2015 appear to have been mostly cosmetic in nature. While it led to much hand wringing on the part of industry executives and some unwelcome attention from certain politicians, it has had very little discernible effect on dietary supplement sales. Hanson said dietary supplement ingredient and finished product companies continue to be hot acquisition targets, and long term structural factors in the economy favor this trend.
“From my perspective as I look at the health and wellness industry things have never been better. Trying to be healthy has gone from where it used to be a niche idea that concerned 10% or 20% of the population to now where it has become mainstream. People talk about their health more and they share it on social media more. Consumers are adopting healthy foods more and they’re changing their lifestyles,” Hanson told NutraIngredients-USA.
“What that means from investment perspective is because so many of the larger companies that are in the packaged goods and processed food industries don’t necessarily have the entrepreneurship capabilities in house to launch these new, innovative products, they are constantly looking for new products and new ingredients to acquire,” Hanson said.
Hanson said companies are looking for new and unusual ingredients and finished products, and that doesn’t necessarily mean patented processes.
“More so than anything people are looking for something that is unique, and that doesn’t always mean something that is proprietary. They are looking for some amount of brand awareness, some marketing clout,” he said.
And from Hanson’s point of view the NYAG affair has had no effect on what he sees as the biggest opportunity for supplements, which can be found in Asia overall and an in China in particular.
Hanson splits Asia up into component parts, as China is so much bigger relative to the other markets and its regulations stand apart from those of the ASEAN nations. Chinese consumers have a growing interest in dietary supplementation, and even with the recent slight slowing of economic growth there, the middle class in the country grows by millions every year.
At the retail level the Chinese market is a complex one, with a potentially confusing set of overlapping regulations. Network marketing companies focused on selling nutritional supplements, such as Herbalife and Usana, have found a way to sidestep the difficulties inherent in trying to compete for shelf space by working through their network of distributors local sales offices. This model also helps ameliorate the distribution nightmares inherent in traffic-choked Chinese urban areas.
Hanson said for mid-level companies who are not participating in the network marketing game there is another way. The Internet has spawned a cross-border trade in supplements into China that dwarfs any other market on earth.
“China’s overall economic growth has slowed somewhat but in comparison to other markets it is still very dramatic. The biggest platform is in cross-border sales, where they will buy supplements online and ship them. A recent statistic from China Daily put the value of the Internet medicines sales at $1.1 trillion last year (supplements are regulated as a subset of medicines in China). That’s incredible,” Hanson said. According to information from China Daily much of this activity is carried on on sites such as Tmall and Taobao, platforms of Alibaba Group Holding Ltd.
Hanson said the Made-in-USA message is a powerful one and is helping to drive the growth of the cross-border traffic. After a number of public health scares and scandals, Chinese consumers don’t trust in-country brands as they once did. And companies from other countries have a quality halo for Chinese consumers too, Hanson said. Another recent China Daily article cited the success of Australian supplement brands Swisse Wellness and Blackmores in the market. Blackmores reportedly sold almost $106 million worth of supplements in China over the past year, accounting for almost a third of its total revenue, news which drove optimistic stock traders to more than triple the company’s stock price.