Functional food giving supplements a run for their money: Packaged Facts

11-Aug-2014 - Last updated on 12-Aug-2014 at 14:30 GMT

After taking a hit due to recent negative press and a consumer shift toward more use of functional food and beverages, the US nutritional supplements market will see growth return to just over 6% per year through 2018, when sales will reach $16.4 billion, according to Packaged Facts.

Buoyed by the rising probiotic and digestive health category, supplements are projected to post a strong second half, reaching $12.8 billion in sales by year end, the market research firm estimates.

Growth in the market slowed in 2013 and the first part of 2014 in large part due to negative press coverage of supplement safety and effectiveness. Two studies in particular, one stating multivitamins provide no health benefits, and a second study showing omega-3 may increase prostate cancer risk impacted the market significantly. Unsurprisingly, omega-3/fish oil and calcium/bone supplements have been hit the hardest, with sales declining by double digits in 2013. The Global Organization for EPA and DHA Omega-3 (GOED) estimates that overall retail sales of US omega-3 products (supplements and fortified foods and beverages) dropped by 11% in the six months after publication of the 2013 study linking omega-3 use to elevated prostate cancer risk.

Moreover, a growing number of consumers are ditching supplements in favor of functional food. Indeed, almost 90% of Americans now consume vitamin or mineral-fortified foods, and as much as 20% of adults say they’re cutting back on their use of supplements due to fortified food intake. In fact, much of the supplement category growth during 2011-2013 actually came from inflation, price increases and a shift by supplement users to brand name products rather than increases in volume of sales; sales by volume in IRI’s multi-outlet (MULO) category was actually down 0.6% in 2013 even though sales by value were up 3.4%.

Top three brands can’t match overall industry growth; Vitafusion climbs 54%

Many of the top competitors struggled in 2013 in the face of overall market challenges. Still, The Carlyle Group easily remained the top competitor in 2013, followed by Pharmavite, and Pfizer (though none matched the industry’s overall growth). The Carlyle Group and Pfizer posted limited sales growth, while Bayer actually saw its 2013 sales decline 4.2%. Other top-tier competitors such as Bausch & Lomb managed double digit sales growth last year, and many second-tier competitors also grew sales faster than the market average.

The top brand in nutritional supplements in the MULO channel in 2013 was Pharmavite’s Nature Made line of vitamins and minerals, which earned its parent $647.6 million. The clear winner for market growth was the Vitafusion brand of Church & Dwight, which climbed a whopping 54.1% in 2013 to hit sales of $55.1 million—all of it organic growth.

Digestive, eye health lead growing condition-specific category

According to IRI scan data, condition-specific supplements accounted for 26.6% of all MULO channel supplement sales in 2013, led by digestive and eye health. Digestive health and probiotic sales contributed significantly to that figure, posting an almost 25% increase in sales in the MULO channel in 2013. More than 40 new probiotic supplement products hit store shelves in 2013, about half of which were private label.

Eye health has also become one of the fastest growing categories within condition-specific supplements, with sales of eye health supplements in the MULO channel up 9% in 2012 and a further 10.5% in 2013, moving the category up to fourth place in terms of condition-specific segment sales.

On the other hand, sales of bone health/calcium supplements and women’s health supplements combined dropped 16.9% in 2013, due at least in part to the growth in sales of functional foods and beverages with calcium. Joint health supplements by volume were down only slightly in 2013.

Elsewhere, herbal supplements have enjoyed steady growth since 2011 (led by cranberry and Echinacea supplements), reaching $1,312 million in 2013. But recent press coverage surrounding unsafe or altered herbal supplements will dampen sales, with growth slowed to 3.8% for 2014.

Sales by volume of children’s dietary supplements in the MULO channel were up a notable 3.4% in the 52 weeks ended Jan. 26, 2014. Multivitamins lead the charge, comprising an overwhelming 80% of children’s supplement sales.

Where will future growth come from?

Some of the key trends affecting nutritional supplement sales through 2018 include an aging population, rising consumer knowledge and awareness of personal health, and a growing expectation of personalization for nearly all services and products.

Digestive health will remain a major opportunity for marketers, along with marketing supplements free from gluten (the most common “free-from” claim in 2013, according to Packaged Facts) and genetically modified organisms (projected to be as common as “wheat-free” and “dairy-free” claims by 2018).

Simmons National Consumer Survey results spotlight a few demographic segments as showing significant growth in supplement use between 2009 and 2013. The most notable are the 65–74 age bracket, where 75% of respondents used supplements, and increased use in the Hispanic population. For Hispanic people, supplement use tends to be irregular, suggesting marketers should encourage and educate existing Hispanic customers on the benefits of more regular supplement use.