Dietary supplements are taking a beating in the mainstream press these days, but a new study funded by the Natural Products Foundation provides more positive fodder about the economic benefits provided by the supplements industry. According to the study, the dietary supplements industry contributes about $61 billion annually to the U.S. economy, supports more than 450,000 jobs and paid more than $10 billion in taxes in 2006.
“Most industry assessments primarily focus on sales, but this is really just the tip of the iceberg,” said Tracy Taylor, executive director of the Natural Products Foundation. “The labor, materials and technology necessary to move each product from a raw material to the final sale cause a whole spectrum of economic consequences.” Preliminary Nutrition Business Journal estimates peg 2008 U.S. consumer sales of dietary supplements at about $25 billion.
The Economic Impact Report, completed by Dobson | DaVanzo, a Washington D.C.-based economic research firm, is the first to quantify the dietary supplement industry’s overall financial impact on the national economy by considering such contributing factors as supply, production, research, direct employment, manufacturing, taxes, and the extended financial effects these factors produce.
NBJ’s upcoming U.S. Nutrition Industry Overview double issue, which will publish in July, will offer more details about the Natural Products Foundation’s Economic Impact Report, as well as 2008 sales and growth estimates by product segment and channel for dietary supplements and other nutrition industry product categories. To order your copy of the issue, subscribe to NBJ or download a free 32-page sample issue of the journal, go to www.nutritionbusinessjournal.com.
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In a May 18 Sports Illustrated cover feature titled “Supplements: The Dangerous Obsession with Improved Performance,” David Epstein and George Dohrmann do their best to deliver a knock-out punch to the sports supplement industry and the Dietary Supplement Health and Education Act (DSHEA), which the writers say is the basic reason the sports supplement industry has become “a Pandora’s Box of false claims, untested products and bogus science.”
The piece brings up numerous examples of professional players being punished for using supplements spiked with banned substances, delves into the recent Hydroxycut recall and rehashes the dark days of ephedra. It also features several sports supplement retailers and product developers who reap riches from selling and concocting stimulant-filled products that can be sold “with no proof of effectiveness or safety, and without approval from the FDA.” The story goes on to talk about about how GNC salespeople are paid commission by sports supplement manufacturers to push their products on “unsuspecting customers” who “are sometimes steered to a supplement that is inappropriate for their needs.” It ends with discussion of sports supplement companies manipulating the findings from clinical research or rigging the studies altogether. Taken as a whole, the articles paints a grim portrait of a rogue sports supplement industry that the writers say Nutrition Business Journal research estimates generated nearly $20 billion in U.S. sales in 2007.
The trouble is, the writers use carefully chosen examples to tell only one side of the story—and they misleadingly cite NBJ research to create a picture of an industry that appears much larger than it actually is. In 2007, U.S. sales of sports supplement products totaled $2.5 billion, while the entire U.S. sports nutrition & weight-loss (SNWL) sector—which includes sports supplements, weight-loss pills, meal-replacement supplements, low-carb foods, nutrition bars, and sports & energy drinks—generated just under $20 billion in sales in 2007. Yes, sales of sports supplements have been growing but they still constitute a relatively small piece of the overall SNWL market—and this certainly was not made clear in the way Sports Illustrated cited our research.
Exposés such as the Sports Illustrated article are, unfortunately, not new for the dietary supplement industry, and they will continue as long as there are examples of products containing banned substances, of researching being manipulated, of false or misleading claims, or of people becoming sick after using a supplement—even if these instances do not reflect the overall nature of the supplement industry at large.
The good news is that now the supplement industry has good manufacturing practices (GMPs) and the serious adverse event reporting (SAER) system to ensure supplement product quality and demonstrate the safety of dietary supplements. We also have organizations such as the Council for Responsible Nutrition, the Natural Products Association and NSF International to ably communicate the positive, responsible side of the supplement industry and help ensure the safety and quality of supplement products. But, in this day and age, the industry is likely to need more than that if it wants to protect its reputation and current regulatory structure. To weather the current media storm, all supplement companies are going to need to help defend the industry by strictly adhering to GMPs and DSHEA, by speaking out against potentially damaging products and companies, and by only doing business with those companies whose practices and ideals they support.
Related links:
How Worrisome is the Hydroxycut Recall for the Dietary Supplement Industry?
Industry Making Strides in Improving Tarnished Image of Weight-Loss Supplements
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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:
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How Worrisome is the Hydroxycut Recall for the Dietary Supplement Industry?
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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.
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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.
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