Consumer confidence, transparency & innovation: What's going on in the dietary supplements industry?
The following article is based on a recent presentation I gave at the annual members retreat of the United Natural Products Alliance. Loren Israelsen has invited me to present at the UNPA annual retreat for several years, and has always given me a blank canvas upon which I could paint a picture of the industry as I see it from my editor’s chair. This year I considered the issues of consumer trust and confidence after what was a bruising year for the industry.
GNC, for example, has had a tougher year than most: They received one of the cease and desist letters that announced NY Attorney General Eric Schneiderman to the industry in February 2015. They then came to an agreement with his office to allow them to get the products back on store shelves only to be met with criticism from the industry for ‘validating’ the DNA technology that so many said was not fit for purpose. GNC, to their credit, then engaged with the industry in a way I have not seen during my 10+ years of covering the industry, and rolled out the botanical raw materials GMP guidelines. But they had a disappointing Q3, and they had a disappointing Q4, and they recently reported a disappointing Q1. The company is now undertaking a strategic review, and there may be a sale down the road.
And it’s been tough on other fronts: AGs from other States have climbed on board to scrutinize the industry; we’ve had Sen Claire McCaskill become more involved and vocal; we’ve continued to have negative press articles, like the Frontline segment in January, and we’ve had Harvard dismiss supplements (Harvard’s Women’s Health Watch, April 2016).
It’s been blow after blow. And so you begin to wonder if this is affecting consumer confidence. How can it not? Can consumer trust these products or this industry anymore?
The sales data
Well, if you take the 30,000 foot view and look at sales, there doesn’t seem to be much of a problem. It looks like the negativity has been like water off a duck’s back. NBJ says the industry has grown from $36 billion to close to $40 billion. Sales data from SPINS puts sales around $13 billion in the channels that it follows but the overall trend over the last few years has been for continued growth (see figure on the right).
But what about herbal supplements? You may think this category would suffer because they were at the center of the NY AG’s actions with his DNA barcoding. Well, again going to SPINS, the 30,000 foot view again suggests growth. Nobody is deserting the category. And even if you drill down a little further and look specifically at the herbs targeted in the original DNA barcoding tests, SPINS data again shows no decline (see figure below). So all is good, right?
So maybe consumers don’t pay any attention to the headlines. Maybe the bad press doesn’t matter that much (however, it clearly matters for the politicians and attorney generals, who love to be named in headlines).
Or maybe consumers don’t understand what it all means. Talk of DNA barcoding, good manufacturing practices, supply chain integrity, supplier verification could be just too technical for consumers.
There was a consumer panel at the CRN Annual Conference last year that was incredibly illuminating. They assembled about a dozen average consumers and showed then a bunch of mock headlines and news reports about supplement quality and safety issues, and asked them if these would change their opinion. There may be quality issues, they said, but they don’t affect the brands I use.
Could it be that consumers are not as smart as we think they are?
Are heavy consumers on the decline?
New data from TABS Analytics adds an interesting layer of insight to the conversation. TABS CEO Dr Kurt Jetta presented results from the 9th Annual Vitamin Supplement Survey on May 25 and stated that, while total penetration (or usage) among consumers remains high (about 76% of people used supplements in 2015), and while there were slight increases in the number of people who regularly use 1 or 2 supplements (light users), there may be some drop off for heavy user (people who bought more than six supplement products in 2015).
I would argue that the heavy users are the more informed supplement users, the people who do their homework, who read the headlines, and may have cut back on their usage accordingly. It’s only one data set, but it is an interesting insight.
The innovation angle
It’s possible that the negative media is having an effect on some consumer groups, but there are more aspects to this that we have to consider, and a big one that I want to throw out there is innovation… or the lack thereof.
We hosted the NutraIngredients-USA Omega-3 Forum in April and one of our panelists, Sam Wiley, CEO of the Wiley’s Finest, said that retail buyers are bored with omega-3s. How could you be bored with omega-3s? The science is so compelling. Yeah, but fish oil is fish oil. Krill was something of a novelty and bloomed brightly with the MegaRed product, but reports are now that krill may be in decline.
And if you listen to earnings calls with the likes of GNC and Vitamin Shoppe, their CEOs often bemoan a lack of innovation in the industry.
So we have to remember that there is a significant part of this industry that is fad driven. If you use Google Trends to assess the consumer interest in ingredients named on Dr Oz, you can see this in action. The two figures below show US search volume for green coffee bean extract and raspberry ketones. The Dr Oz effect? The Dr Oz Bubble more like.
(The exception to this is astaxanthin, which exploded in 2011 and has remained relatively high in consumer search volumes.)
And bringing this back to the safety issue, we can also use Google Trends to explore search volume for a variety of terms. For “Dietary supplements safety”, “Dietary supplements quality”, “Dietary supplement concerns”, “supplement concerns”, and “vitamin concerns” Google will tell you that there is not enough search volume to plot the data.
However, “Supplements safety” does produce results, and there’s a very obvious peak in January 2016, which I’m pretty sure corresponds to the PBS Frontline show.
Superficial conclusions from all of this is that consumers are interested in these issues but they’re still buying supplements every now and again, and they continue to have some confidence in the brands that they know. There is a suggestion that some of the heavier users may be reining in spending somewhat, and that may also be linked to less innovation in the category.
Clearly something is going on, and the time would seem to be right now to do something about it before it manifests in sales and consumers leaving the category.
The industry is putting a lot of attention on transparency – opening up about a company, the supply chain, the quality standards, corporate ethics & values, and this is definitely a good thing. A lot of consumers want to know these things, particularly those Millennials and now the Gen Z consumers.
GNC’s botanical raw material GMPs guidance should be applauded. Likewise, CRN’s product registry initiative. We’re hosting forums and panel discussions on transparency and stakeholders are signing up to attend.
Because of all this, and despite all of the negativity, there is a part of me that wants to say that 2015 was a good year for the industry because the conversations happening now have to happen.
But how does the industry go about communicating these initiatives with consumers? Some brands have spent on advertising to emphasize the quality of their products, like Nature Made/ Pharmavite advertising with the USP mark. NSF’s Certified for Sport has also become an important mark of quality, but only in the sports realm.
UNPA conducted surveys during its November 2015 summit on analytical testing and February 2016 summit on raw materials & supply chain issues and found that, if the dietary supplement industry could move towards a single seal of quality, it would have to be a new seal (81% of responders). For more information about those surveys, please click HERE.
We’re seeing the likes of Labdoor.com publish data on supplement quality testing, and sites like Examine.com review the scientific substantiation of supplements and their ingredients, and their success shows that there is a consumer want for this type of information.
What’s at stake
Chronic disease costs
Heart disease and stroke = $315.4 billion (2010 data).
Cancer care = $157 billion (2010 data)
Diabetes = $245 billion (2012 data)
Arthritis and related conditions = $128 billion (2003 data)
Obesity = $147 billion (2008 data)
The industry has to get this right and the time is now, because what is it at stake is the health and economic future of a nation. Healthcare costs are totally unsustainable and nutrition and nutritional products can play a central role (see the CRN's report on healthcare cost savings for more information). I would like to believe that the majority of the responsible companies genuinely want to have a positive impact on consumer health, and the industry should talk more about this.
If the dietary supplements industry isn’t a key voice in this conversation about healthcare then it will be left behind. Advances with the microbiome and personalized nutrition, for example, are bringing big food companies like Nestlé and General Mills more into this area. They are exploring the potential of these technologies, and they will increasingly compete for consumers.
Michael Stroka, executive director of the Board for Certification of Nutrition Specialists (BCNS), told me recently: “Nutrition is the single greatest determinant of life-long health, but while nutrition is at the core of health it is not at the core of healthcare.”
That needs to change, and the supplements industry can and should be an important part of the change.