Quality, safety and efficacy will continue to determine success or failure in the modern nutraceuticals market, which is under increased scrutiny by federal authorities.
In the 20 years following the passage of the landmark Dietary Supplement Health and Education Act (DSHEA), the U.S. nutraceuticals industry has become an integral part of both public health and the economy. About two-thirds (68%) of U.S. consumers reported taking supplements, according to a 2014 survey commissioned by the Council for Responsible Nutrition, and a vast majority (83%) expressed overall confidence in the safety, quality and effectiveness of these products.
However, Good Manufacturing Practice (GMP) requirements continue to present challenges to many companies, as demonstrated by FDA warning letters that are made public on a weekly basis. Meanwhile, economically motivated adulteration has been a significant problem for decades. Keen understanding of what’s required under the law, along with appropriate testing methods and secure, transparent supply chains, will be critical to ensuring product safety. Empowered with new enforcement tools afforded by the Food Safety Modernization Act (FSMA), expect federal agencies to dedicate more time and resources to oversee the dietary supplement industry and enforce existing laws.
This past June, a U.S. Senate hearing on weight loss products, which featured popular TV personality Dr. Oz, shined a spotlight on questionable science that supported sales of otherwise unproven products. Expect further FTC action against companies that fail to support claims, which includes use of the undefined term “natural” on products that contain artificial or synthetic substances.
Additionally, expect debate to continue over labeling of genetically modified organisms (GMOs) and, more broadly, the role of science, technology and engineering in the food supply amid an expanding population and shrinking natural resources.
—Sean Moloughney, Editor, Nutraceuticals World
The past couple of years have seen a sharp rise in public and private capital financings for technology companies. The enthusiasm for technology investing has spilled into the food and nutrition world. In its “Food Tech & Media Report,” Rosenheim Advisors said $800million went into food tech companies in September 2014 alone! Whether it’s Good Eggs, Blue Apron or Hello Fresh, investors appear keen on food businesses. Even the U.S. Postal Service is partnering with Amazon Fresh to bring groceries to my front door.
Delivery is a curious place to start in the nutrition value chain. Even Whole Foods, with a reputation for high prices, only ekes out a profit margin of about 4.5%. Simplifying the chore of shopping for supplements or food is not a new idea. Fifty years ago, a pint of milk appeared at the door six days a week in many places. But will this new crop of technology powered companies fare any better than the milkmen or the delivery models from the dot-com era of the 1990s?
The public capital markets will decline at some point. The severity of the downturn will impact private investors, who will need to keep plenty of cash in reserve while entrepreneurs will be hoping the cash is transferred to their balance sheets before everyone rushes for the door.
—Steve Allen, Co-Founder, Nutrition Capital Network
Increased raw material costs and a continued interest in concentrates mark two of the takeaways from the EPA and DHA omega-3business in the U.S. in the last year. With El Nino conditions in Peru causing a potential suspension of anchovy fishing for the fall season, there remains a big question mark on the supply situation going forward. In the retail sector, year-over-year mainstream sales declined for the first half of 2014, but a small uptick was noted in August and the industry is cautiously optimistic about a more positive future. The omega-3 coalition, organized by GOED and a group of industry partners, successfully completed a test market campaign inCharlotte, NC, and is now focusing on a more comprehensive roll-out in 2015.
—Ellen Schutt, Communications Director, Global Organization for EPA & DHA Omega-3 (GOED)
One trend has been consistent in the dietary supplement industry, and arguably all industry categories, for the past decade: the requirement for consumer education and transparency. Access to the Internet and the proliferation of information has led to a more sophisticated and complex paradigm of customer service. Today’s consumers reach much farther up the supply chain to gain information and verification about the products they buy or intend to buy.
Education of consumers now requires more than marketing messages. Validation of claims through scientific and/or third party verification is increasingly mandated. Social media has emerged as a double-edged sword in terms of accuracy and content. Total and complete control of consumer education content and accuracy relating to a product is important but exceedingly difficult. For this reason more attention to social media content monitoring will continue to rise in importance. Transparency has also taken a larger role in consumer expectations; questions across all levels of the supply chain are complex and detailed. The line between proprietary and requested information becomes increasingly narrow. Honesty, ethics and integrity are important guidelines to navigate the transparency issue. Companies cannot afford to stonewall questions from consumers anymore than they can afford to become an open book.
—Scott Steinford, CEO/Founder, QX-Partners