Catalina Lifesciences Inc. is a practitioner supplement firm that I’ve had my eye on this year—and apparently, I am not the only one impressed with the innovative business model behind the company’s brand Bariatric Advantage, a nutritional supplement line designed specifically for weight-loss surgery patients. On August 20, the leading practitioner supplement company Metagenics Inc. announced it was purchasing Catalina Lifesciences for an undisclosed amount.

Helping meet the unique nutritional needs of the 230,000 Americans who undergo weight-loss surgery each year was the impetus behind the creation of Bariatric Advantage in 2002. “After undergoing bariatric surgery, a patient requires special nutritional attention for the remainder of his or her life,” Thomas Kinder, president and CEO of Catalina Lifesciences, told Nutrition Business Journal earlier this year. Once a weight-loss surgeon introduces his or her patient to the Bariatric Advantage line of products, that person could ostensibly be a customer for decades, Kinder added. “The average age for [bariatric] surgery is 40, so it’s a relationship that we could maintain for many, many years.”

The Bariatric Advantage business is a “perfect fit” with Metegenics’ mission of using therapeutic nutrition to combat chronic illness, said Metagenics CEO Fred Howard. “Working together, Metagenics and Bariatric Advantage will shape the market in the rapidly growing bariatric nutrition field,” said Howard (who took over as CEO on August 16, when Metagenics Founder and CEO Jeff Katke became the company’s chairman). “We will continue to invest in scientific validation, new product development and distribution to support these programs.”

Both Metagenics and Bariatric Advantage have successfully sold conventional medical doctors on the benefits of nutritional supplementation—which I believe will play a key role in growing and strengthening the legitimacy of the dietary supplement market moving forward. In the case of Bariatric Advantage, Catalina Lifesciences has relied on practitioner education to bring the majority of bariatric surgeons operating in the United States on board with its supplement products.

“Even though they are doing these invasive procedures that can cause nutritional problems, bariatric surgeons don’t receive nutritional training or generally know much about nutrition,” said Jacqueline Jacques, ND, chief of scientific affairs for Bariatric Advantage. “The more we increase what we do with education and support services, the better our [surgeon] retention is and the more we continue to experience accelerated growth, even in a down economy.”

Bariatric Advantage also uses the Internet to support its surgeons’ sales. According to Kinder, the company has built e-stores for more than 500 of its bariatric surgeon customers, who typically sell Bariatric Advantage supplements as a value-added service for their patients. “Obviously, the e-commerce component helps with sales, but it also enables patients to stay in contact with their doctor and learn about changes to the nutrition protocol for this category,” Kinder told NBJ. Thanks to help from the Internet and customers who require specific nutritional supplements for the rest of their lives, nearly 60% of Bariatric Advantage’s sales are generated via auto-ship programs set up on the web, Kinder said.

Under the Metagenics’ umbrella, Bariatric Advantage will retain its branding and continue to be run by Kinder and his leadership team. Said Kinder, “The additional resources provided by Metagenics’ research, business systems and global presence will expand our ability to bring the advantages of our products to a much broader audience of bariatric patients and healthcare professionals worldwide.”

For more on recent M&A transactions within the nutrition industry, check out NBJ’s Finance and Investment issue (which is hitting subscriber mailboxes now).

Related NBJ links:

2010 Direct-to-Consumer Selling in the Nutrition Industry Report

2010 Archived Practitioner Supplement Sales Web Seminar

April 2010: MLM & Practitioner Sales in the Nutrition Industry

The supplement market has been hit with some pretty negative press over the last week, thanks to the meta-analysis questioning the safety of calcium supplements and Consumer Reports’ cover story on what it calls “the 12 most dangerous supplements.” Yet, it’s a third piece of news that broke regarding a product called the Miracle Mineral Solution that has me concerned. After all, the quality and validity of the calcium meta-analysis is debatable, and the Consumer Reports piece also advises consumers to consider taking what the magazine says are 11 safe and beneficial supplements—but I believe the MMS issue is a symptom of a more serious problem that threatens the legitimacy of the entire supplement industry.

On July 30, the U.S. Food and Drug Administration (FDA) issued a warning to consumers about Miracle Mineral Solution (also called Miracle Mineral Supplement and MMS). What’s the cause of FDA’s concern? Well, apparently when this product is consumed according to the directions on its label, this liquid mineral supplement turns into a “potent bleach used for stripping textiles and industrial water treatment,” the agency reported in a warning letter to consumers. As if that weren’t alarming enough, MMS marketers and distributors claim the product can treat an unbelievable range of diseases, including HIV, hepatitis, the H1N1 flu virus, acne and cancer.

Available for purchase via a wide range of Internet sites (including Amazon.com and eBay) and sold through several different companies, MMS contains 28% sodium chlorite. The product’s labeling advises consumers to mix MMS with an acidic drink such as orange juice, which turns the solution into an industrial-strength bleach. The FDA said it received several reports from consumers using MMS who experienced serious adverse reactions, including “severe nausea, vomiting and life-threatening low-blood pressure from dehydration.”

Upon reading the FDA’s warning, my immediate reaction was, “Why the heck is this product still on the market?” The agency did say it is continuing to investigate MMS and “may pursue civil or criminal enforcement actions as appropriate to protect the public from this potentially dangerous product,” but I’m wondering what will be required to push the agency to take more forceful action.

I posed that question to supplement and food attorney Marc Ullman, who turned out to be equally perplexed by this situation. “I have no idea why this product is still on the market,” Ullman told me via e-mail. “To my knowledge, the long history of outrageous claims associated with [MMS] is well documented.” According to Ullman, the last product posing such potential health risks was GHB (gamma-hydroxybutyric acid), a precursor to GBL (gamma buterol lactone), a.k.a. “date rape drug.”

“FDA did bring criminal charges against some distributors in that instance,” Ullman said. “If the allegations here are correct, I think that similar action would be warranted. In fact, I believe that criminal charges could easily be justified based on the kind of claims associated with MMS alone.”

What do you think should happen with MMS? Should responsible industry take steps to get involved and protect itself from products such as MMS?

Related NBJ links:

2010 Nutrition Industry Overview Web Seminar

FDA Files Motion to Shut Down Three Sports Supplement Manufacturers

Although my opinion could be considered biased, the NBJ Summit team—led by Patrick Rea and Tom Aarts—outdid itself again with this year’s annual gathering of nutrition industry leaders. Held July 21-23 at the St. Regis Resort in Dana Point, California, the sold-out 2010 NBJ Summit brought together more than 300 CEOs, presidents and other executives for what proved to be an inspiring, instructive and thought-provoking three days of education and networking.

Below are several of the key messages that emerged from this year’s NBJ Summit:

• Innovate your way out of a downturn: The recession took a big bite out of the nutrition industry’s product development activity in 2009, as many companies focused on survival rather than creating their next breakthrough product. But, as Sterling Rice Group Managing Partner John Grubb demonstrated in his keynote titled “The Imperative to Innovate: Disrupting the Competitive Context,” downturns are the exact wrong time to put the brakes on new product innovation. As Grubb noted, with higher risk comes greater reward, making game-changing innovations the key to thriving during tough times and claiming more than your fair share of a market opportunity. Also, product line extensions tend to make up most of a company’s revenues, but new products drive the greatest profit growth.

• Fail fast: True innovation isn’t possible without the risk of failure—and, as Grubb told NBJ Summit attendees, most of what you do will be wrong at first, so prepare to fail quickly and use the lessons from your missteps to move your innovations forward. Because failure is a natural part of innovation, the innovators in a company must be given the time to learn from their mistakes, Grubb added. Of course, creating a forward-thinking ecosystem of innovation can be more easily accomplished at private companies, which are typically not held hostage to quarterly results the way public companies can be.

• Prepare to be scrutinized: Whether it’s coming from the U.S Food and Drug Administration (FDA), the Federal Trade Commission (FTC) or the “bounty hunter” law firms looking to get rich off of class-action consumer lawsuits, U.S. nutrition companies must be prepared to have their products, science and claims put under the microscope. Serious future scrutiny could come from FDA’s impending new dietary ingredient (NDI) guidance, which could publish later this year. If the guidance becomes stricter, an estimated 40%-60% of the current dietary supplement market could be adversely affected.

• Make the world your oyster: As Christine Holgate, CEO of Australia’s largest dietary supplement company, Blackmores, told a packed Summit audience: Even those companies with successful, fast-growing businesses in their home markets should consider global expansion. Under Holgate’s leadership, Blackmores is now in seven markets and is considering launching into others. According to Nutrition Business Journal estimates, total global nutrition industry sales grew 6.6% to $288 billion in 2009. This growth was somewhat higher than the 4.4% growth the $108 billion U.S. nutrition industry experienced last year.

• Choose your global partners carefully: As NOW Health Group President and CEO Al Powers told Summit participants, moving into a new market without carefully vetting your in-country partners or fully understanding the business culture can be expensive mistakes. Powers candidly told the audience that he learned this lesson the first time NOW entered the Chinese market a decade ago and the company’s Chinese partner stole NOW’s product and then marketed other counterfeit supplements under the NOW brand. The experience didn’t scare NOW away from the promising Chinese market, however: Under Power’s guidance, NOW is once again building its business in China—this time with much more success.

• Don’t be afraid of big pharma: Former GlaxoSmithKline (GSK) executive Stephen Stefano spent his NBJ Summit keynote address attempting to convince the audience that pharmaceutical companies—like GSK—can be good partners for the nutraceutical industry. As Stefano explained, blockbuster drugs are becoming fewer and far between and the margins for pharmaceuticals continue to shrink. This is making it more important than ever for drug companies to diversify their product offerings. “The climate is ripe for pharmaceutical companies to get involved in nutraceuticals in a productive way,” Stefano said. He used GSK’s prescription fish oil product, Lovaza, as an example of a “nice fit between pharma and supplements.” Global sales of Lovaza have now topped $1 billion, leading many Summit participants to wonder: What will be the next blockbuster supplement-based drug?

• Never forget Rule No. 6: One of the most inspirational moments during the 2010 NBJ Summit came from Benjamin Zander during his keynote address. In what was (correctly) billed as a life-transforming talk, the Boston Philharmonic Orchestra conductor coached attendees to live their lives and lead their organizations from the viewpoint of possibility rather than from fear, anger or complacency. My favorite part came when Zander presented what he calls Rule No. 6: “Don’t take yourself so damned seriously.” Duly noted!

• Live like Ohno—no regrets: The 2010 NBJ Summit closed on another inspirational high note with the keynote address from eight-time Olympic medalist Apolo Ohno. Ohno, who has launched his own dietary supplement company called 8 Zone, opened himself up to questions about everything, including why he created 8 Zone, what supplements he takes, the music that keeps him going during training and why he respects the South Koreans (who have been some of his greatest competitors on the ice). In explaining how he was able to dedicate four years of rigorous training to prepare for a few minutes of Olympic speed skating competition, Ohno said he learned to remain focused on the journey and live each day with no regrets.

Registration for the 2011 NBJ Summit will open later this year. Sign up early, as this year’s event sold out.

Related NBJ links:

Going Global: Taking Your Business Overseas & Getting it Right the First Time

Leadership Secrets from Top CEOs - Growing Your Business (and your career) in 2011 and Beyond

You know the United States has reached a new state of litigiousness when a consumer sues Kellogg’s for not putting real fruit in its Froot Loops cereals, as Roy Werbel did in April. The disgruntled cereal eater filed a class-action lawsuit in San Francisco federal court that alleged the cereal company’s marketing “is deceptive and likely to mislead and deceive a ‘reasonable consumer’ such as himself” into believing the company’s popular sugary cereal contains actual fruit—even though the product’s ingredient label clearly communicates the opposite. The suit demands Kellogg’s pay punitive and actual damages to all consumers who were mislead by the Froot Loops name.

Although it certainly sits at the “crazy” end of the legal spectrum, Werbel’s suit is part of a recent spate of consumer lawsuits targeted at U.S. nutrition industry that have cost food and dietary supplement companies tens of millions of dollars and counting.

As Laurie Budgar reports in an upcoming Nutrition Business Journal feature, many of these suits have been high-profile cases challenging the product claims made by the likes of Airborne, Dannon, Bayer, Snapple, General Mills, Coca-Cola and even Biggest Loser star Jillian Michaels. The celebrity trainer, who sells a range of detox and weight-loss products under her name, was sued in February 2010 by three different customers who claimed that the Jillian Michaels Maximum Strength Calorie Control failed to help them lose weight as advertised. One customer, who is seeking class-action status for her suit, took legal action after using the product for about a month.

Other recent actions have blitzed multiple companies simultaneously, such as the March 2010 suit filed in California against six fish oil manufacturers and two retailers, with allegations that their products contained PCBs at levels beyond the established “safe harbor” limit and that they failed to disclose this contamination to consumers.

For companies affected by such suits—even frivolous ones—the financial hit can be significant, according to Ivan Wasserman, a law partner at Washington, D.C-based Manatt, Phelps & Phillips, who specializes in matters involving the marketing of foods and dietary supplements. “The ultimate damage,” he told NBJ, “would be lost sales if the news of the case or settlement damages—rightly or wrongly—the public’s trust in the company and its products.”

Are lawsuits on the rise within the U.S. nutrition industry? What can companies do to protect themselves from becoming the target of consumer legal action? Check out NBJ’s 2010 Nutrition Industry Overview issue to find out. Not a subscriber? Go to the Nutrition Business Journal Website to sign up today.

Related NBJ links:

2010 Healthy Foods Report

‘Pixie-Dust’ Dosing Threatens to Erode Consumer Confidence

European Union’s Health Claims Legislation Sets Nutrition Industry on Edge

Tuna’s Prop 65 Win Could Help Supplement Firms in Their Own Lawsuits

Although the economic downturn pummeled new product development in the U.S. nutrition industry last year, the tide may be turning. Wellington Foods, a long-time contract manufacturer of liquid and powder nutritional supplements recently reported to Nutrition Business Journal that the company is seeing a resurgence in new product investment in 2010. “We are optimistic that we will be able to recover from the sales dip we took in 2009 and be back to 2008 levels by the end of the year,” said Tony Harnack II, president of Wellington Foods.

But business isn’t totally back to normal. The recession weeded out those companies that were willing to make riskier investments in faddish products, Harnack noted. As a result, the product categories generating the most interest from supplement marketers are those that will provide the most proven benefits to consumers. “The categories that have great science behind them—such as calcium and vitamin D—are most in demand,” Harnack said.

As the economy slowly improves, companies are also once again willing to develop new products that may have been viewed as more discretionary during the recession—such as liquid energy or nutricosmetic products, Harnack said. Growing consumer interest in liquid and powder form supplements is adding to the growth of Wellington Foods, which is in the process of moving into a new state-of-the-art manufacturing facility in Corona, California.

Preliminary findings from NBJ’s survey of supplement manufacturers and marketers shows that most companies continue to take a cautious approach to new product development, with the majority of respondents reporting that their plan is to only slightly increase or keep their product development activity the same in 2010 as it was in 2009.

NBJ’s 2010 Nutrition Industry Overview issue will include more from our interview with Wellington Foods, as well as a detailed view into the complete findings from our latest supplement survey. We’ll also publish the opinions of a wide range of nutrition industry leaders on the current state of the economy and what is expected for the second half of 2010. If you would like to weigh in, e-mail your answers to the following three questions to cmast@nutritionbusiness.com by June 21.

• Based on what you are seeing in your business, how do you feel the economy in 2010 is faring versus 2009?

• What specific signs are you seeing in your business that indicate economic recovery is either picking up or stalling?

• How is the economy currently affecting your business today, and what are you expecting for the second half of 2010?

If you are a supplement manufacturer or marketer, please consider taking NBJ’s survey. We are using the results of this survey to support research for our annual Nutrition Industry Overview issue, which assesses market performance in 2009 and provides NBJ’s forecast for 2010 and beyond. In addition, we will use responses to help update our list of the top 100 supplement wholesalers in the United States. Respondents who complete the survey will receive a summary of the survey results in PowerPoint format.

Related NBJ links:

2009 Supplement Business Report

Liquid Weight-Loss Meal Replacement Data: 2000 - 2008 - Chart 239

Supplements Stand Out As 2008 Sales Bright Spot for U.S. Nutrition Industry