We received 554 responses to our survey from dietary supplement manufacturers, ingredient suppliers, contract manufacturers, food and beverage players, and more.
1. Positivity reigns
Despite political uncertainty and ongoing negative headlines about dietary supplements, the industry continues to attract consumers and sales continue to rise across multiple segments and retail channels. We conducted the survey before the recent threats of trade tariffs between the U.S. and China were announced, but the responders were bullish: An impressive 76% of our respondents believe their company’s outlook is more positive today than 12 months ago. That was compared to 72.5% last year.
“With the flight to quality production requirements, we are well positioned to capitalize on this with our 38 year history of excellence,” wrote one responder, while another stated: “We are overcoming the perception that supplements either do nothing or are a rip-off. The public is looking for as many ways as possible to achieve health.”
2. Consumer confidence
And this positivity extends to how our respondents gauge consumer confidence in dietary supplements, despite ongoing negative media. An impressive 68% of respondents agreed that “consumer confidence and trust in dietary supplement products is increasing” (and that mirrors data from actual consumer surveys, like the CRN Annual Survey).
“Consumer knowledge is improving allowing them to make the best decision for themselves; this is why transparency is now so important,” wrote one respondent.
3. Industry initiatives to boost transparency
We also asked how our readers view industry initiatives like botanical raw material GMPs, the Supplement OWL, GRMA, and SSCI. Sixty-seven percent agreed that such initiatives will lead to greater transparency and boost consumer confidence, with only 10% disagreeing.
While many voiced support and expressed their ‘hope’ that such initiatives would have boost transparency and confidence, there was scepticism from some respondents: “The average consumers doesn't care about programs like this and never use them. They probably don't even know about them,” said one respondent. Another stated, “While there is increased hype about these initiatives, there will still be players that only 'conform' on paper.”
4. The bottom line
The positive outlook is carried through to expected financial performance this year. Overall, 69% of our respondents anticipate profit margins improving over the next year. And that’s up from last year, when 64.7% predicted improved margins.
Not everyone was positive though, with one responder noting: “The problem here is in the supply chain, which is seeing substantial and apparently continual price increases at the base material level.”
5. Investment in people
As companies expand and explore more markets, more people will be needed, and many of our respondents agreed that they will take on more staff this year than they took on last year (48%). Twenty-two percent disagreed, and the rest didn’t know.
“As a US manufacturer, the new tax plan makes it more attractive to invest in the USA with new people and equipment,” said one respondent.
Some industry stakeholders have voiced concerns about the new dietary ingredient (NDI) draft guidance and how it may have a chilling effect on innovation in the ingredient space, but there are still plenty of old ingredients to play around with, and new delivery formats hitting the market. Overall, 62% of our respondent expected their company to invest more in new product development (NPD) this year than last year. Fewer than 15% didn’t think their company would invest more.
We saw in question 4 that many companies expected to invest more in new product development (NPD) this year, and people are seeing a lot of innovation in the industry. A whopping 75% of our respondents agreed with the statement: “There is more innovation going on in the dietary supplement industry today than 5 years ago, and it’s happening all along the supply chain.”
One responder did add a note of caution, however: “There is continued Intellectual Property theft, and that has a chilling effect on new investment in our space,” they stated.
8. The entrepreneurs are coming!
We’ve seen a lot of new entrants to the dietary supplements market over the last couple of years, from Ritual and Care/of to Multiply Labs, and our respondents expected this to continue with 74% agreeing with the statement, “2018 will see more entrepreneurial entrants to the dietary supplements market, with novel delivery formats and customization leading the way.” That's up 10% on last year.
“I hope so. Lots of consolidation tends to drive down innovation. Should be good opportunities for new players...if they are good,” noted one responder.
Another stated: “Personalization is leading the way. And subscription services.”
9. Personalized nutrition
Following on from the previous question, we asked if personalized nutrition is a focus for your company in 2018 and beyond. Fifty-five percent said yes, with only 28% saying no.
Another sector that has seen exceptional growth is probiotics, with the friendly bugs popping up in products well beyond their traditional applications of supplements and dairy products. “The importance of the microbiome is a revolution whose time has come,” said one respondent. Almost 50% of our respondents agreed that the probiotics sector is the most exciting sector in dietary supplements in 2018.
“Three letters spell excitement – g-u-t,” added another respondent.
11. Big growth expected for healthy aging
Our readers were also asked to pick a health category that will see the greatest growth in 2018, and healthy aging was the winner, with 39% of the votes. Second was digestive health with 20%, followed by cognitive health and active nutrition at around 18% each.
Beauty-from-within, which has been garnering a lot of attention, particularly with the rise of collagen-based supplements, lagged far behind.
“The +50 age group is growing much quicker than the rest of population opening new markets for healthy aging solutions,” observed one respondent.
12. Social media and online marketing
We’re all aware of the power of a tweet, but how are companies navigating the social media environment to monitor consumer conversations and behaviour and communicate directly with them? An impressive 70% of our respondents agreed that online marketing and social media initiatives will be more important than traditional marketing in 2018. Despite this, there remains a key role for traditional marketing.
“While we will definitely be increasing online and social media marketing initiatives, traditional marketing is still predominant,” said one respondent.
13. ROI on trade spending
If social media and online marketing is indeed going to be more important, what does that mean for promotional/trade spending? Are companies getting their money’s worth? The results of our survey indicate that it depends on the company, with almost 40.5% saying they agreed that they were getting a good return on investment in promotional/trade spending, while 14% said they were not. The rest (45%) just didn’t know.
14. The rise of online
Amazon, BodyBuilding.com, Vitacost, iHerb: Buying your supplements online makes a lot of sense to many consumers, particularly younger ones who want the convenience of one click purchasing. Despite the surge, 40% of our respondents disagreed with the statement, “online retail sales revenue has surpassed bricks & mortar for my business”, while only 25% agreed with it. Bricks and mortar remains the “bread and butter” for many firms.
15. Online only?
The majority of our respondents (53%) also said that their company has no plans to launch new products with online only distribution. Twenty-seven percent said their company would launch products with online-only distribution.
16. The role of the trade show
We asked the question if companies find their ingredients in places other than trade shows, and the vast majority (73%) said yes (referrals and internet searches, noted one respondent). But trade shows are a way to bring the industry together, deepen relationships, and get more in-depth informatio.
“Trade shows are useful, somebody can discuss more deeply with the suppliers,” said one respondent, while another stated: “We’re focused on branded ingredients with superior support - they are all at trade shows.”
The regulatory landscape for dietary supplements in Latin America is changing, and the economic climate is improving, so it’s not surprising that many companies are increasingly looking south for opportunity. Forty-two percent of respondents said LATAM is an important market for their company, while 38% said no.
Several respondents commented that their company would expand into LATAM this year or next year.
18. Who owns the industry?
There has perhaps never been more capital available to the dietary supplements industry than right now, and investment from private equity and/or foreign entities is expected to continue, according to our responders. Indeed 65% agreed with this, with only 8% disagreeing.
19. The industry’s biggest challenges
Finally, we asked our readers what the biggest challenges for their businesses. As you’d imagine, this generated a wide range of responses, but the key issues that were consistently mentioned included: Uncertainty around regulations in different geographical markets and “erratic enforcement” in the US; the threat of “frivolous litigation”; how to maintain margins and control costs as raw material prices fluctuate; staying competitive in the face of online competition and “me too” products.
One of the most cited challenges focused on marketing, with different respondent voicing concern from different angles.
“The pressure of social and online media and the prevalence of emotional messaging over science-based messaging,” stated one respondent. “Companies keep turning their marketing up to 11, so it's very difficult to be authentic about products/ingredients and still cut through the noise,” said another. “Sorting real science from junk science and its marketing,” said a third.
NutraIngredients-USA would like to thank everyone who took the time to respond to our survey.