Vitamin Retailer conducted a roundtable discussion of industry professionals and association leaders to reflect on 2010 and forecast what’s to come in the New Year.

Panel

Andreas Koch, marketing director for Barlean’s (Ferndale, WA), manufacturer of flaxseed and fish oil Omega Swirl products

Keri Marshall, MS, ND, and medical director for Gaia Herbs (Brevard, NC), grower and manufacturer of organic herbal products

Bob Green, president of Nutratech, Inc. (West Caldwell, NJ), exclusive distributor of the thermogenic weight loss and sports nutrition ingredient, Advantra Z®

Ken Whitman, president of Peter Gillham’s Natural Vitality (Austin, TX), best known for its flagship product Natural Calm®, The Anti-Stress Drink

Al Powers, president of NOW Foods (Bloomingdale, IL), manufacturer providing high-quality, affordable nutrition products for six decades

VR: What were some of the main challenges facing the natural products industry in 2010?

Koch: Aside from a softer than average national economy, the Food and Drug Administration (FDA) has tightened the noose with claims that are now allowed on labels and marketing materials.This makes it much more difficult for natural product manufacturers and, in turn, retailers to convey health benefits and product value to consumers.

Marshall: The primary challenge facing the natural product industry, and likely most industries, is the continuation of the downward economy. Most people do not have disposable income at this point and are forced to make choices about where to save money.Because natural products are often more expensive than OTC drugs and non-organic products, consumers feel they have to choose the less expensive option out of necessity.

Whitman: Walking into a natural products store, customers are confronted by aisles of supplements, which can be daunting, to say the least. The proliferation Of supplements is a hurdle across the board—for manufacturers in terms of differentiation, for retailers in terms of what to stock with limited shelf space and for customers in deciphering how to stretch their budgets to get the essential nutrients they are lacking.

Powers: Negative media coverage that all too often reports one study, which is often problematic in design to begin with, as somehow definitive when the body of science is ignored, can create doubt among some consumers. The challenge continues to be for retailers to engage their customers in conversations to allay those concerns. To do that, of course, the retailers have to stay on top of the media coverage and educate themselves to respond. We have tools on our website to help with that’s and retailers can call our technical hotline to get advice.

VR: What were some of the hottest products categories in 2010? Do you see those categories continuing their reign into 2011?

Koch: We expect to see continual growth with essential fatty acids (EFAs) as well as immune support products, in particular as the ongoing flu phobia is covered in the media.

Marshall: Products that support the body during stress continue to be some of the hottest-selling products and I expect this will continue into 2011 as people are becoming more, not less Stressed by the state of the economy and job loss. Stress, lack of sleep and generalized fatigue continue to be some of the most pressing health problems for people that affect all parameters of life including mood, job performance and daily life activities.

Green: Energy and sports nutrition were two of the hottest product categories in 2010, and we do expect growth to continue into 2011. These products were originally intended for bodybuilders and serious athletes, who want less fatigue during a workout and better recovery afterwards, but the audience has broadened to include soccer moms, fathers-on-the-go and weekend warriors. Stretching across all age groups, these categories pose real opportunities for retailers.

Whitman: Organic continues to be the hottest category and this will continue to grow in 2011 and beyond.The more people recognize the toxins and lack of nutrients present in “conventionally” grown foods, the more they will use organic as a seal of safety.

Powers: Omega-3s are strong sellers as well as “clean” sports nutrition products. Personal care continues to grow as customers are looking for healthy alternatives.

VR: What opportunities lie before the industry as we embark on a New Year?

Marshall: Negative media attention around dietary supplements with regard to efficacy, dosing and adulteration continues.While adulteration is a very real problem and concerns need to be addressed, many responsible companies go to great lengths to ensure purity, potency and integrity of their products.Gaia Herbs in 2010 introduced an industry-first traceability program called Meet Your Herbs™ that enables consumers to enter a product ID number and then trace all aspects of the herb’s cultivation, harvesting, extraction and quality testing validation. Ultimately, this program provides consumers with a sense of confidence that they are in fact receiving a high-quality product that meets label claims.

Green: I don’t think retailers have even begun to tap consumers’ selfhealth care possibilities. Weight management, sports nutrition and energy categories are growing because, while people can’t control the economy, they can control certain aspects of their health by managing their weight.

Weight management and sports nutrition directly impact the underlying risk factors of so many health issues, including arthritis, cardiovascular disease, certain cancers and even infertility.Retailers and manufacturers who address the role that obesity plays in many of the health issues facing people today are those that are going to see high gains in sales.

Whitman: Both the challenge and the opportunity for the natural products industry is to be the industry with a conscience— this is a major differentiating factor between our industry and industrial agriculture, Big Food and Big Pharma. Our industry started as the “health food” industry—health and well-being is implied. We need to maintain our ideals, keep our integrity and take a clear stand for creating a sustainable Economy that values well-being and a health care system that recognizes that health begins with sound nutrition and drastically lowering our environmental toxic load.

VR: How do you advise retailers in stocking their stores and caring for customers in 2011?

Koch: Retailers should clean shelves by getting rid of the slow-moving SKUs via deep clearance sales beginning now. Substitute these dead dogs with historically proven, strong-turning products.Run reports showing product-turning Performance and simply drop the very worst sellers. Cleaning out the clutter of multiple SKU choices and retaining high-performing products for each category will not only improve a store’s profit efficiency, but also benefit consumers as only select “best of” products will be displayed on shelves for each category.

Green: Economics aside, consumers’ need for weight management products is growing. A new report released this summer from the Centers for Disease Control said that adult obesity levels have risen 44 percent since 1997 (from 19 percent to 28 percent). This number is even higher—32 percent—among Baby Boomers, which does not bode well for future health as this group enters its 60s and 70s. There’s no doubt that the weight management/sports nutrition/energy categories will continue to grow. We see manufacturers becoming more sophisticated in their formulations—not only addressing the specific health concern, but also the underlying risk factors, which frequently center on the battle of the bulge.

Whitman: The natural products industry is in the right place at the right time.Customers are looking to take more control over their health and their lives.Well-educated retail sales personnel can assist greatly. If guided to a product that will really help, customers will not only be back for more, but will spread the word. The best customer loyalty is achieved by truly serving the customer.Stock stores attractively in a way that makes it easy for the customer to navigate.Make sampling and education a part of the mix.

Powers: With the prospect of more regulation, higher taxes and a struggling economy with huge deficits, the industry will not enjoy the relatively high growth rates we have experienced in the past two decades.However, retailers that offer good value to their customers, are true to their mission of health and that partner with suppliers who are aligned with that mission will have opportunities to grow at a higher rate than the industry.

Associations Sound Off

Coming through a turbulent but triumphant 2010—from economic troubles to the defeat of the McCain bill and the FTC Powers legislation—VR conferred with the trade associations that represent the industry in Washington, DC to gauge the regulatory temperature for the New Year:

John Gay, NPA executive director and CEO:

I don’t see the “natural” trend slowing down, but perhaps a noteworthy challenge remains how consumers can tell what “natural” means in a market where over 10,000 “natural” products are introduced annually. The answer is greater use of the NPA Natural Seal, which we saw it grow significantly in 2010.Retailers can help customers by asking suppliers for products that carry the NPA Natural Seal.

The greatest hurdles remain from the government, probably more from the regulatory side than the legislative side. A challenge in its own right and a driver of government activism is the issue of the outliers in our industry intentionally spiking supplements with pharmaceuticals. I think this year we will see more activity on the regulatory front, such as increased activism from the FDA and FTC, and the new NDI (New Dietary Ingredient) guidance. Some of this is welcome when it is targeted at the outliers in the industry, but when it starts to inhibit our legitimate operations, then it is a concern.

I think our industry’s defense of DSHEA against the McCain bill sent a message to Congress, so I do not expect to see such a frontal assault on DSHEA in 2011. But I can foresee potential Congressional attacks on certain aspects of DSHEA or segments of the industry. Probably a greater threat to DSHEA comes from the regulatory side. For example, the FTC is pushing pharma-style substantiation requirements on individual companies.

This is a wonderfully diverse industry, and overall I see a brighter 2011 if the economy continues to creep out of recession, and if we remain vigilant against threats of overregulation.

Michael McGuffin, AHPA president:

We’ve tried for years to pay close attention to the concerns of this industry’s critics— it’s an advantage to listen and take in the perspective of why they don’t like supplements or herbs.It’s that perception that was the impetus to create adverse event reporting (AERs); that we should take on that burden to quiet critics.

Quite different than AERs are the critics using the gross increase in the number of products illegally masquerading as supplements (primarily weight loss, sexual enhancement and sports nutrition products) as a requirement for legislative efforts. This is a real problem for anyone in the trade because it places an undeserved badge on our industry. While we need to attend to those critics—those that say this industry doesn’t have to register its products and we’re doing whatever we want—this is one area where vigilance from suppliers, manufacturers and retailers will be more useful than additional legislation.

One thing I’ve noticed over decades is more stability than novelty on the herb side. The same herbs that were ranked in an Herbalgram 15 years ago remain in the top today (i.e., ecchinacea, garlic, saw palmetto, ginseng, noni, St. John’s wort, soy). I think that’s a message worth paying attention to: that you have every reason to think that stability will continue, that the predominant will stay predominant.

Herbs are seen as more credible because of the strict clinical, placebo-controlled studies that have been completed. Another possible outcome in the mind the of consumer would be the separation of proven and unproven herbal products that will hit the market in the short term, and that perception will be in the hands of the retailer.

Steven Mister, CRN president and CEO:

We’ll be hearing a lot in 2011 about the 2010 dietary guidelines, with an emphasis on the fact that consumers should be eating the right kinds of foods to obtain their nutrient needs. While the US Department of Agriculture is talking about how consumers should eat more fruits and vegetables, the majority of people are not getting everything they need from food alone.That is where we come into the discussion.

With the advent of health care reform, we are seeing more interest from consumers, insurance companies and even health care practitioners in Supplement use as a method to promote wellness.

The question is increasingly asked, “How do we transform health care from sick care to well care?” What a great opportunity for us if we can seize that momentum. We can reinforce the perspective taking supplements when you’re healthy, helps you stay healthy, and consumers staying healthy helps reduce societal health care costs.

The challenge for retailers will be to appropriately position supplements, and not make promises that are illegal. Retailers should be prepared to see a continued increase in enforcement from the Federal Trade Commission (FTC) in looking at claims being made to consumers, so they should arm themselves with knowledge of what they can and can’t say. One way to prepare for this is by visiting CRN’s “An Advertising Roadmap for Retailers” at www.crnusa.org/roadmap.

There will also be additional concerns From the FDA about products contaminated with prescription ingredients. Government agencies have said they will focus on the sexual enhancement, weight-loss and muscle-building categories. Retailers need to be focused on those products and pay closer attention to work with manufacturers that carefully scrutinize ingredients and suppliers. Retailers will also need to monitor label claims in these categories to ensure the product’s claims are not going overboard.

We’re going to have 80 freshman members of Congress at the start of the 112th Congress in January, and most of them are not coming in with a background on dietary supplements. We think it’s most important to be on the Hill, orienting the new members of Congress to FDA and trying to inoculate them early so that they understand we are a regulated industry. The industry needs to be active to play a part in the outcome of these issues. Talk to your district member, especially if they’re new. Go to town hall meetings. Visit district offices. Write to members of Congress. You have a job in helping us sensitize all these new members to our industry. Our issues are not partisan issues—we have supporters on both sides of the aisle. What does make a difference is ensuring that Democrats and Republicans alike understand what our industry is about and how and why the regulations that govern it work.