The Nutrition Capital Network II Spring Meeting in New York City has highlighted a number of prevailing trends in the nutrition industry’s financial landscape.
1. The financial markets are in crisis. Compared to NCN I in San Francisco last fall, there are fewer venture capital firms in attendance and more private equity and strategic buyers searching for start-ups with revenues of $3-5 million and positive cash flow. Investors are also very aware that any investment negotiation will likely be in their favor if drawn out and multiple down cycles can be capitalized on. Entrepreneurs, of course, are anxious to secure financing and improve their chances of surviving the down economy.
2. Strategic buyers with free cash are starting to look at deals. Because the debt markets have grown cold, strategic buyers have become the leading potential acquirers the industry. Entrepreneur valuations, however, have not yet in alignment with what the strategic buyers are willing to pay. As the U.S. financial crisis continues down the path that it is on, entrepeneurs will reset their expectations and deals will continue to be done, but at lower valuations compared to prior years.
3. Prepare for a long downturn. In discussions with economists, investors, stock brokers and industry experts at NCN II, it is clear that the consistent stream of bad economic news will continue. Consumer credit and spending statistics coming out in the next few months will supplement the subprime mortgage crisis and push the U.S. economy deeper into recession. One long time stock broker compared this downturn to the recession of the 1970s, which effects lasted 8+ years.
Buckle down.
If you’d like to read more about the state of investment and finance in the nutrition industry, I urge you to read NBJ’s February 2008 Finance & Investment Issue.
Sally Squires, a Washington Post Health & Nutrition columnist, published an investigation of probiotics today.
It’s a relatively well balanced piece citing reputable sources…..what a rarity!
Sally discusses the growing widespread use of probiotics, their exact undetermined definition, unknown side effects, dosage uncertainty and clear health benefits. It’s a worthy read for anyone needing to be knowledgeable of what the popular press is publishing about the nutrition industry.
Science is slowly catching up to consumer interest in dietary supplements. Thousands of consumer health websites, forums and blogs detail the ability of dietary supplements to cure and treat chronic and fatal diseases, but only a handful of studies have been released thoroughly testing the efficacy of dietary supplements to treat these diseases.
Today the Journal of the American Medical Association published a story on the treatment of Crohn’s Disease with Omega-3 Fatty Acids.
In this study, 188 patients received omega-3 fatty acids and 186 were given placebo. The study conclusion found: “In these trials, treatment with omega-3 free fatty acids was not effective for the prevention of relapse in Crohn disease.”
Early estimates by NBJ indicate that the omega-3 fatty acid market grew 25-30% in 2007, down slightly from 2006 growth levels, but well within expected ranges of new incremental sales. In foods, omega-3 fatty acids are receiving interest from food manufacturers, but savvy consumers realize that efficacious doses are difficult to achieve through food fortification alone…unless you choose to eat a fishmeal tortilla. Tasty.
The popular press regularly publishes investigative reports on the dietary supplement industry. Often they are of a critical slant. It’s not difficult to see why. The regulatory status of the dietary supplement industry is practically flimsy with a post-market regulatory structure but little funding to support oversight by the FDA. As a result, unscrupulous or honestly unaware manufacturers and marketers at times launch adulterated, unsafe and mislabeled supplement products into the market. Consumers play a role too. They believe what they want to believe - extrapolating curative effects from structure-function claims and anecdotal successes stories.
Today, the New York Times published an article exploring this three pronged problem that the dietary supplement industry struggles with. You may read the article titled, Potential for Harm in Dietary Supplements here.
I encourage your comments below.
-Patrick
Michael Pollan, author of “Omnivores Dilemma” and “In Defense of Food”, gave a riveting keynote speech at Natural Products Expo West 2008. I was fortunate to hear it in person, but if you were unable to make the Mr. Pollan’s speech, you’re in luck.
I am delighted to inform you that Michael Pollan has allowed New Hope to post his keynote address on www.expowest.com.
Click on the link by the words “audio recording” on this page
I hope you enjoy it as much as I did.
Please feel free to comment on his speech via the comments function below.
