Category growth helps mushroom supplement company secure expansion financing

By Steve Hanson

- Last updated on GMT

Photo courtesy of Aloha Medicinal.
Photo courtesy of Aloha Medicinal.
Aloha Medicinals President Mike Brown shared with NutraIngredients-USA that capital investments have been made enabling Aloha Medicinals to double its mushroom production capacity in the United States in response to growing global demand for medicinal mushrooms. Founded in 1999, Aloha Medicinals has grown to become the largest US organic producer of medicinal mushrooms.

Globally, the mushroom category is estimated at over $50 billion with $25 billion for food/culinary use and $25 billion for medicinal mushrooms, respectively. A significant portion of this market is represented by the Asian marketplace where mushrooms have a long standing tradition of use in Traditional Chinese Medicine (TCM). The market for mushrooms in the US is rapidly growing but has not gained the same credibility or size as in Asia.

"Aloha Medicinals has experienced double-digit growth each of the past five years and we have made investments and plans to meet this accelerating growth by more than doubling our capacity,"​ said Brown. "A significant amount of our growth is coming from Asia but we're now getting more inquiries from major food and beverage companies looking at medicinal mushrooms as a functional ingredient."

The expansion investment was initiated immediately after Aloha Medicinals was acquired by American Botanicals​ with an investment made from Advantage Capital Agribusiness Partners (ACAP), a $154.5-million private equity fund that is licensed by the U.S. Department of Agriculture (USDA) as a Rural Business Investment Company (RBIC). The fund is a partnership between Advantage Capital Partners and nine Farm Credit organizations, and is focused on providing more private capital, small business investment and quality jobs to rural America. Aloha Medicinals, which is based in Carson City, NV (the company started in Hawaii, hence the name) sells finished dietary supplements and bulk mushroom powders for inclusion in other formulations.

Brown added, “Advantage Capital and American Botanicals are continuing to seek out additional investment opportunities in U.S.-based botanical companies as the natural space is an attractive and growing market segment.”
 
US market growth via category development
Even though more growth is originating from Asia, Brown also sees growth in the U.S. market that could be accelerated by focused efforts on category development and building awareness for the health benefits of mushrooms.

"Suppliers need to understand the dynamics of category development. In the U.S., in order to expand the market, more emphasis needs to be placed on growing the size of the overall category. This is accomplished by publishing and promoting more research on the health benefits of mushrooms. It also can be accomplished by a leading brand promoting mushrooms as a key ingredient for their targeted health platforms," ​said Brown.

Mushrooms have largely been positioned for condition-specific products for immune function and cancer support. Although industry influencers and natural product practitioners know the benefits of mushrooms, these benefits have not been realized by mainstream consumers.

Brown believes that existing suppliers in the market spend too much time on differentiation of production practices among themselves and ultimately, aren't significantly growing the overall size of the market.

"We need to establish mushrooms as a viable and effective alternative for specific health conditions among U.S. mainstream consumers. Today that awareness and acceptance isn't present,”​ he said.

Increased Market for Sports Nutrition and Cognitive Health

Brown said that Aloha Medicinals has a culture bank with 5,000 species, of which the company cultivates around 100 different mushroom types annually and 20 of those species represent a majority of sales.

"In the U.S., we've seen the significant growth of Cordyceps for sports nutrition products along with Ganoderma, Turkey Tail and Lion's Mane for cognitive function,"​ said Dr. John Holliday, chief scientific officer for Aloha Medicinals.

Although the U.S. represents a sizable market for Aloha Medicinals, Brown says their greatest opportunity is in Asia with the developing middle class that demands more US manufactured products and understand the benefits of medicinal mushrooms. Currently, Aloha Medicinals supplies over 700 companies in 56 countries its medicinal mushroom ingredients and products.

About the author: ​Steve Hanson is CEO and owner of Grip Ideas, a consulting firm focusing on global market development strategies and is an executive at Prenexus Health, a prebiotic supplier.  Hanson has worked on a number of international brands inlcuding FloraGlo Lutein, Ester-C Vitamin C, Meg-3 Omega-3 and Meriva Bioavailable Curcumin.

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