Mainstream press coverage of the dietary supplement and healthy food and beverage markets has been anything but positive this week, and the growing barrage of negative news could be a sign of things to come for the U.S. nutrition industry—particularly if the U.S. Food and Drug Administration (FDA) continues to make headlines with what appears to be a stricter regulatory enforcement stance under the new Obama Administration.
On May 13, ABC World News with Charles Gibson included a report about FDA’s warning to General Mills regarding the cholesterol-lowering claims the company is making for its popular Cheerios cereal. This news broke the day before and triggered many print and blog stories, but I was surprised to see ABC News give it more than a minute of prime-time news coverage and include in the piece a broader message that a growing number of food manufacturers are duping Americans with the misleading health claims they put on their products.
Dietary supplements have fared no better this week. On May 12, David Epstein wrote a scathing piece on SI.com (the Sports Illustrated Website) about the adverse health events consumers reported to the FDA in 2008 about dietary supplements. The examples listed in the SI.com piece mostly discuss fringe offerings from small companies and include products with names such as Nuclear Garbage and Fireball Liquifusion. However, Epstein did address more popular, mainstream products in his piece: “Many of the reports concern extremely popular products, like Bayer’s One-A-Day Weight Smart Advanced, which lists increased heart rate—one of the common complaints—in its product information, according to the reports,” Epstein wrote. “The most popular brands and products tend to have the most reports: Herbalife, VPX, BSN, GNC, 5-Hour Energy—and there are 14 reports about Hydroxycut, which was recalled by MuscleTech earlier this month after the FDA warned consumers that it could cause liver damage and had contributed to the death of a teenager in 2007.”
By all accounts, the serious adverse event reporting (SAER) system, which went into effect in December 2007, is good for the supplement industry because it is actually helping to demonstrate the safety profile of dietary supplements. “Data shows the SAER system is functioning as a signal generator and demonstrating the safety of our class of goods,” American Herbal Products Association President Michael McGuffin told attendees of the SupplySide East Trade Show and Convention last month. “The dietary supplement industry fought hard for this good law, and AHPA is encouraged to see it working so well in its first six months.” According to AHPA, the number of supplement AERS submitted between Jan. 1, 2008 and June 30, 2008, were small compared to drug AERs—but you wouldn’t have known that from the SI.com piece.
Epstein’s story—which focuses on several products that in name alone do not appear to be helping boost the credibility of the supplements industry (Who names a supplement product Nuclear Garbage?)—did not come at a good time for the dietary supplement industry, which was already feeling the heat after Iovate Sciences’ recall of its popular Hydroxycut products earlier this month. The SI.com piece also emphasizes the damage a few allegedly bad products can inflict on the entire industry, especially in the age of the Internet.
One lesson I’m taking away from the news coverage the industry has garnered this week is that weeding out potentially dangerous products and pushing all companies to take regulatory compliance seriously are only going to grow in importance under today’s FDA, which certainly showed its muscle with the Cheerios warning. As Bruce Silverglade, legal director of the Washington-based Center for Science in the Public Interest, told Ad Age regarding the General Mills warning: “[FDA is] signaling the rest of the industry that the agency is not going to let a big market leader get away with [false or misleading claims] and won’t let anybody else get away, either.”
Related links:
FDA to General Mills: Cholesterol Claims Render Cheerios a Drug
How Worrisome is the Hydroxycut Recall for the Dietary Supplement Industry?
Breakfast Foods Look to Healthy and Functional Platforms for Growth
Network-marketing companies doing business in the nutrition industry have seen an increase in the recruitment of new distributors, though many of the top companies are reporting downward sales trends for 2008 and the first part of 2009. Companies have capitalized on people looking for new ways to save money or supplement their income in a down economy, but the distributor increases have not translated to higher sales numbers.
Herbalife, one of the largest network-marketing companies in the industry, reported a net sales decrease of 13.7% for the first quarter of 2009, citing unfavorable impact of currency fluctuations. Nu Skin would have posted a 4% revenue gain for the first quarter, but when factoring in foreign currency fluctuations, the company reported a 1% decline. USANA Health Sciences was no different, reporting a 4% decline in revenues for the first quarter and pointing to a strong U.S. dollar that negatively impacted the business. Scott Van Winkle, managing director of equity research with Canaccord Adams, noted that a large exposure to international markets has been particularly challenging for network marketers in the nutrition industry. “They have simply been walloped by the strength in the U.S. dollar. That has impaired earnings and sales right across the group. That’s been one of the most significant themes in the direct selling industry,” he told NBJ.
As companies work to offset the negative impact of currency fluctuations, many have rolled out new promotional programs to attract more distributors in an attempt to increase sales. Mannatech unveiled a program called the Economic Stimulus Plan (ESP) in February 2009, which created a compensation plan that allowed for a shortened selling curve and entry into the business without the accumulation of excess product. The company’s distributor base of approximately 530,000 increased as a result, according to CEO Wayne Badovinus.
Even after network-marketing companies bring in more distributors, it can often take between three and four months before they have any noticeable impact on the business. Dr. Tim Wood, vice president of research and development for USANA Health Sciences, noted the difficulty of trying to turn more distributors into more sales. “While our base of customers is growing, there is pressure to purchase fewer products every month. It’s a wallet-share deal. People feel the pinch and are going to spend a little less on supplements,” he explained.
Van Winkle told NBJ that the big dilemma network marketers are dealing with in this recession is: “Are there enough new distributors to offset lower sales per existing distributor?” Right now, the answer appears to be no. However, the outlook for direct selling may be more favorable than some retail environments. “The fact that there are more distributors is a counterbalancing effect, so the good news is that [the direct selling industry] is not counter cyclical, but it is less cyclical than other segments, assuming you’re selling the right products,” said Van Winkle. As it stands now, the decline in consumer spending has outpaced the ability of network-marketing companies to offset those declines with production from new distributors. However, nearly all network marketers are seeing an increase in interest from potential distributors, so it will be interesting to see if the influx of new sellers has a measurable effect on the sales growth of the major network-marketing companies in Q2 and Q3.
NBJ’s May issue, Direct Selling in the Nutrition Industry IX, will feature a complete breakdown of the MLM market in 2008, including supplement sales estimates and a feature story on raw material and ingredient supply to network marketers. The issue will also include market quantification and detailed analysis of all 2008 U.S. direct-to-consumer sales in the nutrition industry.
Related Links:
Herbalife Experiencing Stellar Sales Despite Slumping Economy
Mannatech Cuts U.S. Workforce by 15%
Stronger Dollar Weakens USANA’s Fourth-Quarter Sales
When Barack Obama was asked by a licensed acupuncturist and massage therapist during an April 29 town hall meeting how complementary & alternative medicine will fit into his healthcare agenda, the president said he is an advocate for doing what works. “I think it is pretty well documented through scientific studies that acupuncture, for example, can be very helpful in relieving certain things like migraines and other ailments—or [be] at least as effective as more intrusive interventions,” Obama told gatherers at the meeting, which took place in Arnold, Missouri. “I will let the science guide me.”
The president went on to tout the appointment of former Kansas Governor Kathleen Sebelius as the new Secretary of Health and Human Services as a step in the right direction for building a healthcare system that is based on science, cost efficiencies and disease prevention. “One basic principal that we know is that the more we do on the prevention side, the more we can obtain serious savings down the road,” Obama said. “So giving children early checkups, making sure that they get immunized, making sure that they are diagnosed if they’ve got eyesight problems, making sure that they’re taught proper nutrition to avoid a life of obesity—those are all issues that we have some control over. And if we’re making those investments, we will save huge amounts of money in the long term.”
Although Obama’s comments certainly shine a ray of hope for complementary therapies, including dietary supplementation, they also further demonstrate the need for such therapies to be backed by solid, defensible research. Nutrition Business Journal will explore the state of supplement research in our Nutrition Industry Overview issue, which publishes in July. To order your copy of the issue, subscribe to NBJ or download a free 32-page sample issue, go to www.nutritionbusinessjournal.com.
NBJ’s 2009 Integrative Medicine report provides a detailed analysis of the $45 billion U.S. integrative medicine market.
Related links:
Briggs: Supplement Use Is Being Influenced by Science
Integrative Medicine Stakeholders Organize to Address Healthcare Crisis
Science: The Engine and the Driver of the Supplement Industry
The FDA is bracing for an onslaught of dietary supplements and other products making false or misleading claims for the H1N1, or swine flu, virus. A quick Internet search found that a number of U.S. companies are currently touting products they say can prevent or cure the H1N1 virus. In an effort to get out in front of what could be a public relations nightmare and provide fuel for tighter supplement regulation in the future, a coalition of supplement industry trade associations issued a statement today urging supplement manufacturers and retailers to “refuse to stock or sell any supplements that are presented as treating or curing swine flu” and to “refrain from promoting any dietary supplement as a cure or treatment for swine flu.”
The groups backing the statement are the American Herbal Products Association, the Consumer Healthcare Products Association, the Council for Responsible Nutrition and the Natural Products Association. In their statement, the groups also noted that “federal law does not allow dietary supplements to claim to treat any diseases, including swine flu” and that they are “unaware of any scientific data supporting the use of dietary supplements to treat swine flu.”
The statement did note that “there are dietary supplements that have much to offer in terms of enhancing general immune function. However, therapies for the treatment of swine flu should only be recommended by qualified healthcare professionals or public health authorities.”
Given mounting public anxiety in the United States and beyond over the fast-spreading H1N1 virus, the associations’ action is an important step in encouraging the supplement industry to act responsibly and legally in the face of a potential health crisis. Let’s just hope companies heed their warning rather than put the industry in jeopardy by attempting to milk profits from public fear.
Related links:
Natural Products Foundation Urges full Enforcement of the Law Regarding False Advertising for Dietary Supplements
Industry Making Strides in Improving Tarnished Image of Weight-Loss Supplements
Avian Flu: Consumer Scenarios and Responsible Marketing
The Federal Trade Commission (FTC) has charged a group of Delaware-based supplement suppliers with making false and deceptive claims surrounding the sale of hoodia gordonii, or in some cases, an adulterated hoodia product. The complaint names four individuals who were employed by Nutraceuticals International or Stella Labs as being the parties liable for the charges.
The individuals allegedly provided customers with documents touting the following false claims: that it would enable consumers to lose weight and suppress appetites; that it was scientifically proven to suppress appetite, resulting in weight loss; that it was clinically proven to reduce caloric intake by 1,000 to 2,000 calories per day; that it was derived from South African Hoodia gordonii; and that hoodia was an effective treatment for obesity. The FTC hopes to permanently bar the defendants from deceptively advertising hoodia and a forfeiture of the profits obtained from sales of their hoodia products.
While this appears to be an isolated incident, the case underscores the concerns that remain about the dietary supplement industry’s ability to police itself, both at a supply and finished goods level. Cases like this where the FTC is forced to get involved only serve to tarnish the reputation of the entire industry. In NBJ’s upcoming Direct Selling in the Nutrition Industry issue, we will take an in-depth look at the claims being made by supplement manufacturers and marketers on the internet, and the difficulties the FTC faces in trying to regulate the disparate e-commerce markets. To download a free sample issue of Nutrition Business Journal, including content from the 2008 Direct Selling issue, please visit our subscriber page.
Relates Links:
Court to Whole Foods: FTC Trial Won’t Be Thrown Out
Whole Foods Sues FTC
FDA Sends Warning to Bayer About Drugmaker’s OTC-Supplement Combo Products
