Nutrition Business Journal

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

When my two-year-old daughter decides she’s hungry, the call goes out for macaroni. Actually, it’s more a wild cry: “Macaroni! Macaroni! Macaroni!” To reach for anything other than a box of Annie’s Cheddar Mac, the one with the rabbit ears, would be a grave mistake.

We buy this stuff in bulk at Costco. To date, it’s the most comforting of all our daughter’s many fickle comfort foods. I came across a feature about Annie’s in the Hartman Group’s online newsletter, HartBeat, via a link from Food CEO. In a compelling analysis of the Annie’s brand called “Inspire Brand Love,” HartBeat singles out some key behaviors that set the company apart. Given that Annie’s took home NBJ’s 2009 Mid-Size Growth Award, these might be lessons to learn for any natural foods company hoping to connect in meaningful and lasting ways with its consumers.

Authenticity: HartBeat describes this as a consistent and effective “brand narrative,” often driven by the humble beginnings of a passionate founder. Annie Withey incorporated Annie’s when she was 27, selling her homemade organic mac & cheese out of her trunk at ski lodges, folk concerts and parking lots. She still lives on an organic farm in Connecticut. These details of perseverance and personal commitment to a cause make immeasurable inroads with savvy consumers.

Transparency: Annie’s is a company that behaves itself. From organic ingredients sourced from family farms to post-consumer recycled packaging materials, the company makes plenty of earth-friendly choices. Annie’s entire carbon footprint is offset through funds to Native Energy and their construction of the Rosebud Sioux Tribe of St. Francis Wind Farm in South Dakota. The specificity of this civic-mindedness—the name of the actual wind farm Annie’s supports—goes a long way toward fostering credibility.

Playfulness: Brightly colored boxes. Rabbits. Sure, playfulness comes more readily to a company marketing food to kids and families, but a sense of positivism and joy carries across the brand. As HartBeat notes, corporate bios on the website carry photographs of key personnel not as they look now, but as they did years ago, as children. This is a playful but meaningful connection to the ultimate consumer of the product.

Wellness: By operating in the natural & organic space, Annie’s timed it right as larger consumer trends pushed sales toward healthy products. Add in a special focus on kids and families, and Annie’s quest for healthier snacking alternatives becomes all the more poignant. HartBeat makes this telling point: “For over 20 years Hartman Group research has seen that consumer decisions surrounding purchases of natural, organic or related products with a health halo are made in part because of the presence of children in the household.”

But the bottom line here is, well, the bottom line. NBJ talked with CEO John Foraker earlier this year about the company’s performance in a recessionary climate. “We saw strong growth across our whole business and in all the channels we serve,” said Foraker. Revenues grew more than 25% in 2009 to approximately $100 million. “We are well positioned for a tough economy,” said Foraker. “Because our products are natural and organic, that might make people feel even better about choosing this healthier option for their kids.”

Related NBJ links:

NBJ Congratulates 2009 Award Winners

2009 Healthy Kids’ Market Report: Food & Beverage

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

A wide range of nutricosmetics products can be found in the United States—and, although America lags behind Japan and Europe in its embrace of “beauty from within” supplements and beverages, the concept has become mainstream enough for The New York Times to take a swipe at it. “Beauty from within, achieved with a pill, sounds so easy, so short cut, so bold, like those T-shirts that say ‘Spiritual Gangster’ on the front,” wrote Alex Kuczynski in a May 6, 2010, article for NYT’s Style Magazine. “If you can just announce to the world that you are a really cool spiritual person with an open heart chakra, why not just take a pill and believe you are gorgeous?”

Kuczynski’s comment—and the entire gist of her article—hits upon the key question plaguing the nutricosmetics market: Do these products really work?

While some beauty-from-within offerings are more efficacious than others, the inconvenient truth for the entire nutricosmetics industry is that many (but certainly not all) of its products and ingredients lack the science necessary to prove their benefits to consumers. This, of course, is hindering U.S. sales—particularly at a time when consumers are being forced to make more careful spending choices. “Americans are more skeptical of the beauty-from-within concept,” Carrie Mellage, director of consumer products at The Kline Group, told (NBJ’s sister publication) Functional Ingredients magazine. “There is a cultural emphasis on scientific investigation, and Americans also want instant results, which nutricosmetics don’t provide.”

According to Alda Brandao, product manager for PL Thomas’s Cosmeceuticals & Nutricosmetics division, the nutricosmetic ingredient Lipowheat is one exception. The product contains natural ceramides from vegetable origin that have been shown to restore skin barrier functions, thus ensuring healthy hydration and the softness and wellness of the skin.

Lipowheat’s efficacy has been demonstrated in three clinical studies, and the product received NDI (new dietary ingredient) notification without objection from the U.S. Food and Drug Administration (FDA) in April of this year—not an easy feat these days. “The NDI is going to bring a lot of attention to this product,” Brandao said.

Lipowheat is manufactured by Hitex, a subsidiary of Lavipharm Group in Paris; PL Thomas is the exclusive marketer of the ingredient, which won the French Association of Antioxidants’s 2007 prize for best health and beauty ingredient. The association’s prize committee gave Lipowheat the award based, in part, on the quality of its clinical studies. In October 2009, Lipowheat received the award for best innovation in dietary ingredients from Isogone Association in France.

“Lipowheat should set the science standard for the nutricosmetics industry,” Brandao said. “If all nutricosmetics products had such solid science and safety data behind them, the consumer would feel more comfortable embracing the beauty-from-within concept.” Lipowheat is available in oil and water-soluble powder formats and can be used in soft gel, capsule or stick pack products, Brandao said. “The beauty of this ingredient is the flexibility it offers for formulation.”

Genuine Health is the first manufacturer to use Lipowheat in a nutricosmetic product sold in the United States and Canada. The company’s dermalipid line, which features the natural ceramides ingredient, hit the market in April 2010.

Lipowheat and other promising nutricosmetic ingredients and finished products will be the focus of The NutriCosmetic Summit, which will be held Thursday, June 10, at the Renaissance hotel in Las Vegas. Kimberly Stewart, former editorial director of Functional Ingredients magazine, and I will open the event’s business & marketing track by first providing some sales context for the beauty-from-within market and then presenting case studies of five nutricosmetics products, including Nestlé’s Glowelle, Solazyme Health Sciences’ Altruest and Isocell North America’s GliSODin Skin Nutrients. Each case study will explore the consumer and ingredient trends being addressed by the product and discuss the brand’s strengths and weaknesses, as well as the opportunities and threats it faces in the market today.

NBJ’s 2010 Nutrition Industry Overview issue, which publishes in July, will also include an in-depth look at the U.S. nutricosmetics market. Subscribe to the journal at the NBJ website.

Related NBJ links:

Will Glowelle Break Open the Beauty From Within Market in the United States?

2009 Supplement Business Report

Baobab, Natural Preservatives and Other Hot N&OPC Ingredient Trends

Related Functional Ingredients magazine links:

NutriCosmetic Summit Offers Palette of Cutting-Edge Education

Both here and in Europe, dietary supplements and functional foods and beverages are feeling the health-claims heat. While the European Food Safety Authority continues its stringent evaluation of food and supplement health claims (rejecting the vast majority of claims it reviews), the Institute of Medicine (IOM) in the United States is calling for the U.S. Food and Drug Administration (FDA) to begin applying the same health-claims assessment methods for foods and supplements as it does for pharmaceutical drugs. In an IOM report released May 12, an IOM committee concluded “that there is neither rationale nor scientific grounds for basing regulatory decisions on different levels of scientific evidence for different substances—science is science.” The report also noted that Congress “may need to strengthen FDA authority to accomplish this goal.”

Not surprisingly, the report triggered an onslaught of news stories, many of them highly critical of dietary supplements and functional foods and beverages. In its June 7, 2010, issue, Forbes Magazine takes on the $37 billion U.S. functional food and beverage industry in a story titled “Snake Oil in Your Snacks.” The piece argues that food and ingredient companies are getting rich by trying to pass their products off as pharmaceutical-like drugs without backing the health claims made for those products with pharmaceutical-grade research. To support this argument, the article analyzes the studies linked to a handful of functional products, including Lifeway’s ProBugs kefir beverage for kids, POM Wonderful’s pomegranate juice and Danone’s DanActive yogurt.

“[Most of the claims] are completely unsubstantiated,” Steven Nissen, head of cardiology at the Cleveland Clinic, told Forbes. “Medical attention does not come from a Cheerios box.”

My biggest issue with both the IOM report and articles like the Forbes “snake oil” piece is that dietary supplements and functional foods and beverages are NOT drugs and consumers typically use these products to support their health over the long haul. A person isn’t likely to replace his cholesterol-lowering medications with Cheerios but might choose this cereal over another for its heart-healthy soluble fiber content. Similarly, I don’t give my sons ProBugs thinking that the fun kefir drinks will strengthen their immune systems so much that we no longer need to worry about eating fresh fruits and vegetables or regularly washing our hands. I do, however, appreciate that ProBugs are organic, contain no artificial colors or flavors, and are rich in calcium, vitamin D and, yes, probiotics.

As Stephen Daniells, the science editor for NutraIngredients, eloquently argued in an editorial published last week, “The regulation of food and drugs may come under the auspice of one agency in the U.S.—FDA—but foods and drugs are different. Just because Hippocrates said food should be our medicine, doesn’t mean we should regulate them as the same thing.”

That said, the dietary supplement and functional food and beverage industries have been home to companies that borrow science, use less-than-efficacious amounts of functional ingredients and/or make outrageous, unsubstantiated claims for their products. These are the companies drawing the ire of practitioners, lawmakers, regulators and the media and bringing about the very real possibility of tougher regulations for both the supplement and functional product industries.

Furthermore, even though supplements and functional foods are not drugs, companies would be wise to take a conservative approach to their product claims and invest in quality research to support the claims they choose to make for their products. This is already the reality in Europe, but the tougher stance on claims substantiation is obviously crossing over the pond to the United States. In the end, raising the level of scientific investment in both the supplement and functional industries will benefit responsible companies and consumers alike.

Nutrition Business Journal’s 2010 Healthy Foods Report, which publishes later this month, provides an in-depth look at the U.S. functional food market. NBJ subscribers receive a 10% discount when they use the code nbjsub10 to purchase this report.

Related NBJ links:

February 2010: Functional Foods and Beverages

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

2009 Supplement Business Report