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

In a little over a week, nutrition industry executives from all over the world will be gathering in Anaheim, California, for the 2010 Nutracon Conference and Natural Products Expo West tradeshow. The Nutrition Business Journal team will be there to meet with industry participants, peruse the massive tradeshow floor, and bone up on the latest issues and trends shaping the global nutrition industry during the Nutracon and Expo West education sessions. We’ll also be presenting our annual NBJ State of the Industry session, during which we will share some of NBJ’s proprietary market data and get down to the “nitty gritty” with a panel of experts about some of the key strategic issues affecting dietary supplements, natural & organic products, and functional foods and beverages. Details about the session are below. We hope to see you there!

NBJ State of the Industry

10:30 a.m. – 12:00 p.m., Friday, March 12, Room 204AB

We’re changing things up a bit for this year’s NBJ State of the Industry presentation, which has become a must-attend education session for many industry executives at Expo West. NBJ Publisher and Editorial Director Patrick Rea will open the presentation with an analysis of how sales of dietary supplements, natural & organic products, and functional foods and beverages fared in 2009 and what we are expecting for 2010. Then, I and Nancy Coulter-Parker, editor in chief of Delicious Living magazine, will interview a panel of industry experts about key issues affecting supplements, natural & organic, and functional products.

On the panel will be:

• Julie Smolyansky, CEO of Lifeway Foods

• Todd Norton, chief operating officer at A.M. Todd Botanical Therapeutics

• Laura Batcha, chief of policy and external relations at the Organic Trade Association

• Mark Fergusson, CEO and chief financial officer at Down to Earth, Hawaii’s only vegetarian natural & organic food store chain

The questions we will be posing to our panelists (and the audience) include:

• Since the election of Barack Obama, the FDA and FTC have stepped up their enforcement of the label claims being used by food and beverage companies. Is this ultimately a good thing for the functional food and beverage industry? What are you expecting in 2010?

• If passed, what ramifications would McCain’s Dietary Supplement Safety Act of 2010 bring about for the industry and consumers? Would the bill do what is needed to weed out the bad players?

• In a statement defending his bill, McCain Dietary Supplement has said that, despite what opponents of his proposed legislation are claiming, “If you take a vitamin now, this bill will in no way restrict your ability to take that vitamin.” Is this true?

• McCain’s bill would require retailers to obtain written evidence from supplement manufacturers documenting that products are registered and adhere to all new FDA requirements. Would such a rule affect a retailer’s ability to offer a wide variety of legitimate supplements?

• The functional food and beverage industry continues to grow at a healthy pace, with new food and beverage products being launched every week. The problem is, however, that some companies will put just a small amount of a functional ingredient into a product just so that they can charge a price premium and promote the ingredient on the product’s packaging and label. How big of a problem is this for the functional food and beverage industry? Is “pixie dust” dosing a common practice? What are the ramifications for the functional food and beverage industry? What’s the solution?

• What really happened to organic during the recession? How did organic sales fare compared to natural sales in 2009, and what is expected for 2010? In what ways were consumers able to save money and still buy organic?

• In 2009, several organic companies introduced a “natural” product or dropped their organic content all together. Do you believe there was a large scale shift from organic to natural, or were these isolated examples?

• Even if only a few companies moved from organic to natural, how do these actions impact consumer perception of the value of organic compared to natural? Some organic companies I’ve spoken with have said consumers are so confused that they believe, in some instances, that natural is actually superior to organic. What are your thoughts on this?

• Does having multiple standards and certifications for natural & organic personal care result in too much consumer confusion?

Is there a question or issue you would like to hear NBJ and our panel of experts address during the State of the Industry presentation? If so, e-mail the question to cmast@nutritionbusiness.com.

Related NBJ links:

Global Supplement & Nutrition Industry Report 2010

February 2010: Functional Food and Beverage Issue

Organic Is Not Immune to Recessionary Woes

With November already in full swing, Nutrition Business Journal is busy pondering the product, ingredient, regulatory, sales channel and other trends we believe will most impact the global nutrition industry in 2010. I’ll be sharing some of our ingredient predictions this week during a VendorWorks session sponsored by Cognis Nutrition & Health at the 2009 SupplySide West trade show in Las Vegas. The session—titled, “Media Roundtable: Ingredient Trends Hot Off the Press,”—will be held from 9 a.m. to 9:50 a.m. on Friday, November 13, in the Galileo 905 room of the Venetian & Sands Expo.

Below is a sneak peek at some of the ingredient trends likely to be discussed during this session and showcased on the SupplySide West tradeshow floor. Many of these ideas come from NBJ’s recently published 2009 Raw Material & Ingredient Supply issue—as well as from Todd Runestad, who is the science editor for NBJ’s sister publication, Functional Ingredients magazine. More 2010 ingredient trend predictions will be published in the January issue of Functional Ingredients magazine.

Immunity-support ingredients: Even though companies cannot talk about the H1N1 flu virus when talking about their ingredients or products, the current global “freak out” over the swine flu pandemic will benefit all ingredients touting immune-support properties, Runestad said. Such ingredients include antioxidants, beta-glucans and botanicals such as elderberry and echinacea.

Brain boosters: The time appears to be right for new cognitive health products, with everyone from aging Baby Boomers to stressed out professionals to parents of children exhibiting symptoms of Attention Deficit Hyperactivity Disorder (ADHD) showing growing interest in these types of offerings. Many well-known ingredients, including omega-3s, are well suited to cognitive-related products and have been scientifically studied to support everything from mood to mental clarity. In addition, the market continues to see the introduction of new branded ingredients targeted toward brain health and global conglomerates such as Nestle are investing millions into cognitive health research.

Prebiotics—what every probiotic needs: Research continues to emerge demonstrating that probiotics work better when combined with prebiotic fibers, such as fructo-oligosaccharide (FOS), inulin and galacto-oligosaccaride (GOS), said Runestad, who added that he believes GOS could be the “big winner in the year ahead.” That’s because food formulators are beginning to formulate with GOS, which also benefits from the fact that companies can make fiber claims for it.

The quest for fullness: As NBJ explored in our 2009 Sports Nutrition & Weight-Loss issue (which published in September), consumers are increasingly craving weight-management products made with proven ingredients that help them lose weight the old-fashioned way: by eating less. This quest for satiety is benefiting ingredients such as FOS and GOS and leading to opportunities for branded ingredients such as DSM Nutritional Products’ Fabuless, a new patented palm oil and oat mixture that is billed as a “natural way to feel full faster” and that is cropping up in functional yogurts and milks.

Bring on the baobob: People have been saying it’s time for ingredient sales of this African super fruit to begin blooming for a while now, but the regulatory acceptance of baobob in both the European Union and the United States is likely to finally make such predictions a reality, Runestad said. Baobab is already showing up in personal care products, as well as in “beauty from within” dietary supplements and functional foods. Alaffia makes baobab lotions and lip balms, while Korres now offers an $80 Wild Rose Face & Eye Serum that contains baobab tree extract. The ingredient, made from the African baobab tree, is packed with riboflavin, niacin, and vitamins C, A, D and E. Because it is relatively new, baobab is not backed by as much clinical research as some other super fruits.

Hemp time: “Thanks to the boom in medical marijuana dispensaries and the Obama administration saying that it won’t go after medical marijuana, I’m guessing that healthful hemp could see some benefits from its evil twin’s get-out-of-jail-free card,” Runestad said. One hemp pioneer is Manitoba Harvest, which recently launched its Hemp PRO 70, the first water-soluble hemp-protein concentrate. Each 30g serving of Hemp PRO 70 contains 21g of protein and 800mg of omega-3s.

Resveratrol boom continues: Media hype has helped to keep consumer sales of products containing resveratrol growing. According to NBJ estimates, consumer sales of resveratrol dietary supplements alone hit $30 million in 2008. ReserveAge Organics, a finished goods supplement firm specializing in resveratrol sourced from organic grapes, has taken advantage of the resveratrol boom and expanded sales by more than 300% since launching in March 2009. Of course, growing demand for products containing resveratrol, which is one of the many polyphenolic compounds found in red wine, has suppliers scrambling to keep up. According to Matt Phillips, president and COO at Cyvex Nutrition, total production volumes of resveratrol have increased more than 100% in the last year. Cyvex sells an ingredient called BioVin Advanced, which is a red wine extract that is standardized to 5% transresveratrol. BioVin Advanced sales have increased more than 150% in 2009 and are forecasted to grow another 100% next year, Phillips said.

Related NBJ links:

Ingredient Trends Likely to Help Boost Sales in 2010

2009 Raw Material & Ingredient Supply Overview

Top Product Development Trends in Healthy Kids’ Market

Related Functional Ingredients magazine links:

Industry resilient, but takes its shots

The Vitamin Shoppe’s better-than-expected initial public offering (IPO) on October 27 demonstrated that the public markets, which have been generally turned off by retail plays in recent years, see lots of opportunity in the dietary supplement and nutrition sector. The IPO was the first for a retail-based company in almost two years, and it raised about $150 million for the 434-store supplement chain. A week before The Vitamin Shoppe’s better-than-expected opening day, a group of 20 smaller nutrition-related companies convened in San Francisco for the fifth meeting of the Nutrition Capital Network (NCN). The purpose of the gathering was to network with private-equity and strategic investors and hopefully wow them with their 10-minute business pitches. Just as The Vitamin Shoppe’s successful opening day showed that the overall IPO market is beginning to thaw, the NCN meeting proved that innovation within the nutrition industry remains strong and that investors continue to see opportunities in the growing health and wellness market.

Chaired by Grant Ferrier and Thomas Aarts (who founded Nutrition Business Journal in 1996), NCN was created to help grease the financing wheels for entrepreneurs and introduce investors to the next generation of successful brands in the nutrition, natural and organic, and green product industries. More than 80 companies applied to present at NCN V. Ranging in scale from startups to a $100 million brand, the 20 chosen represented successful and growing businesses in the food and beverage, food service, supplements and nutrition, and skincare categories. “The level of sophistication in early-stage companies continues to grow, but the passion and drive of the individuals behind them has not subsided,” said Ferrier, who is NCN’s CEO and co-chairman. “We saw that in the 20 companies that presented last week but also in the 80-odd that applied during this cycle.”

Each company that presented represented an innovative technology or tapped into a growing trend within the overall nutrition industry. Below are a few highlights:

Cambridge Theranostics: Based in the United Kingdom, Cambridge Theranostics sells a lycopene-based supplement called Ateronon that is backed by a wealth of compelling research showing its ability to inhibit the oxidation of LDL (bad) cholesterol (oxidized LDL is what triggers heart attacks and other cardiac events). Ateronon is currently sold in 75% of all UK retail pharmacies, and the company is looking for capital to fund its expansion into the United States, the Middle East and China. Cambridge Theranostics is focused on educating practitioners and pharmacists on the benefits of Ateronon so that they will recommend it for their patients and customers.

Dale and Thomas Popcorn: What was interesting about this company is how successful it has been with both its retail brand (Popcorn, Indiana) and its direct-to-consumer brand (Dale and Thomas) without having made any real investment in advertising. Popcorn, Indiana is now the No. 2 popcorn behind Smart Food, and its better-for-you popcorn is selling well in alternative retail chains such as Bed Bath & Beyond and Best Buy.

Freshology: This Burbank, California-based company sells fresh, gourmet, portion-controlled meals directly to consumers, with the goal of taking on companies such as Nutrisystem and Jenny Craig. Freshology is also launching a line of frozen foods next year, and its business model taps into the growing consumer demand for healthy, customized meal solutions. With a production facility at the Burbank Airport, Freshology is able to send its fresh meals all over the country, and I see potential for the company partnering with gyms, wellness clubs and weight-loss clinics to offer fresh, portion-controlled meal solutions to their members.

Froozer: This Lake Mary, Florida-based company’s pitch was certainly the wackiest—and the best tasting. Froozer President Arnold Zweben wheeled in this machine that looked like a frozen yogurt maker. Into the machine went a bunch of frozen fruits and vegetables and out came this cold puree that looked and tasted a lot like soft serve ice cream—only it contained no added sugar, dairy or other ingredients. The machine is called a Transmogrification Unit, and it transforms frozen fruits and vegetables into a whole food frozen confection in seconds. The company said it has done a bunch of focus group research with kids, who like the product because it tastes and looks like soft serve ice cream. Froozer has developed a production system that is able to produce push up pops or other frozen confections made entirely of whole fruits and vegetables. The one I tasted was made with strawberries, bananas, turnips, tomatoes and cucumbers. It was really good and was something my two young boys would have loved.

Herbs of Mexico: Founded in 1948, Herbs of Mexico operates one health and wellness retail store dedicated to the Hispanic community in East Los Angeles, with a second store opening soon. The company wants to open more stores for the growing Hispanic population, which tends to be heavy users of herbal products and other complementary and alternative (CAM) therapies. In fact, Martin Lopez, Herbs of Mexico’s managing owner, said 80% of Hispanics use herbal products and 60% view herbs as medicine. The company also has an e-commerce model and is focused on first expanding its retail locations throughout the Southwest, where it hopes to open 35 to 40 stores in the next five to seven years.

Heritage Foods: Heritage Foods was founded by Patrick Martins, who founded Slow Food USA (he’s sort of a celebrity in the slow foods movement). Through a successful Internet/mail-order catalog model, Heritage Foods sells ethically raised heritage meats (such as Berkshire pork and Bourbon Red turkeys). With all of the recent meat safety scares and the backlash against factory farms, Heritage Foods could represent the future of meat production in the United States—at least for the growing segment of consumers who care about where their meat comes from and how it was raised. The company doesn’t appear to be going after the organic label, but in some ways what it is doing could do more to influence consumer purchasing habits.

Related links:

The Missing Link: NCN Connects Firms, Investors in Nutrition Industry

With Sales Thriving, Vitamin Shoppe Parent Files for IPO

M&A and Investment Activity Slows for U.S. Nutrition Industry

At this year’s NBJ Summit, much discussion centered on the need for industry self-policing to ferret out the bad actors—those companies making illegal product or marketing claims or selling intentionally adulterated products—so responsible companies can continue operating as is and without the need for additional government oversight. The Council for Responsible Nutrition’s (CRN) initiative with the National Advertising Division (NAD) of the Council of Better Business Bureaus to monitor and take action against unsubstantiated dietary supplement advertising is one program helping to achieve this goal.

On August 10, NAD reported that it had referred advertising for the weight-loss product SlimForce 7 to U.S. and Canadian regulatory agencies. In reviewing SlimForce 7’s advertising claims, NAD took issue with numerous statements being made for the product, including: “You can lose up to 1 pound in 8 hours,” “You just need to take 1 capsule a day at breakfast to lose as many pounds as you want,” and “You just don’t lose weight, your whole metabolism is gradually modified.”

NAD tried to contact SlimForce 7 via the 800 number and Website listed for ordering the product and sent a letter to the company’s postal address in Ontario, Canada, but never received a response. (Nutrition Business Journal had a similar experience recently when trying to contact a number of weight-loss supplement companies for our upcoming Sports Nutrition & Weight-Loss issue.)

In a press release, NAD noted that it was particularly troubled by the company’s failure to respond given that the print advertising in question appeared as a full-color, two-page spread in TV Guide and made weight-loss claims that have been found by Federal Trade Commission (FTC) to lack scientific support.

NAD said it will refer the matter to the FTC, U.S. Food and Drug Administration (FDA) and the Competition Bureau of Canada, where the SlimForce 7 company appears to be based.

NBJ’s 2009 Sports Nutrition & Weight-Loss issue, which publishes in September, will include a feature exploring the weight-loss supplement category and the potential silver lining behind the recent Hydroxycut recall. To order a copy of the issue, subscribe to NBJ or download a free 32-page sample issue, go to www.nutritionbusinessjournal.com.

Related links:

NBJ’s Sports Nutrition & Weight-Loss Report 2009

McLemore: ‘There Is No Question That a New and Improved FDA is Emerging’

Industry Making Strides in Improving Tarnished Image of Weight-Loss Supplements

How Worrisome is the Hydroxycut Recall for the Dietary Supplement Industry?