A lack of innovation was cited recently by Tony Truesdale, CEO of The Vitamin Shoppe, as a factor behind ‘dampened’ sales, but are others in the industry seeing this?
“We’re certainly seeing less innovation, and more of a trend towards the branded ingredient suppliers defending their technology and intellectual property,” Jim Emme, CEO of the NOW Health Group told listeners to the NutraIngredients-USA Business Leaders Forum.
“Our point of view on the reduction in innovation is that we believe it is directly related to the upcoming NDI guidance that should be released this month. Many suppliers have told us that they are reluctant to invest in heavy innovation until they know what those NDI requirements are going to be, and we see it has had an impact on consumer choice so far.”
Emme said that he thinks R&D is continuing but people are being very careful with their clinicals. “I also think there are some companies who still don’t fully understand what the extent of the NDIs will be, they’re not sure what approach to take to be accepted as a new dietary ingredient.”
Engagement
Emme was joined on the panel by Tom Tolworthy, president and CEO of Twinlab, Courtney Nichols Gould, co-founder and co-CEO of SmartyPants Inc, and Andrew Shao, PhD, VP of Global Product Science and Safety, Herbalife.
“Innovation is going to require more strategic partnerships between CPG companies, ingredient suppliers and technology companies,” said Herbalife’s Shao. “A single ingredient company developing something from scratch and seeing it all the way through to the marketplace – the traditional way – that’s not where the innovation is going to be, it’s going to be through partnerships and also involving academia. That’s where a lot of the IP is generated and maintained.
“I also don’t think innovation needs to be restricted to specific ingredients or health platforms. Innovating around the supply chain is a key area of focus for future innovation, transparency, maintaining control, and other things like sustainability. I think these are areas where both the food and supplement industry can benefit from innovation.”
“I think those are the areas where I think consumers would like to see the innovation,” added Nichols Gould. “I think that sustainability is a huge opportunity – we’ve been talking about it in the omega-3 space for a while. I think there’s a lot of innovation left, but it may not be in the way we’ve seen it in the past.”
Gummy growth
One category that has seen innovation and incredible growth is gummies. Despite a lot of growth being driven by gummies - 33% of growth in the vitamin, mineral, and supplements category, according to one statistic – we’re nowhere near a ceiling for the category, said Nichols Gould.
“I think it’s because gummies get to one of the major points in the industry and that’s compliance,” she said. “A lot of consumers go to the vitamin aisle with a lot of enthusiasm freshly informed by an article they read or a consultation with their doctor or nutritionist, and they will buy pills but they find it hard to sustain taking those vitamins consistency. I think what you’re seeing in response to gummies is that it’s making it easier for more people to take them more consistently and that drives repeat purchases.”
Nichols Gould attributes part of the company’s success to its youth, noting that the five year old company has grown up at the same time that consumer interests were shifting towards transparency, and towards a focus on how something is made as much as what it is.
“We were able to create our products being informed by that environment,” she said. “Being focused on transparency and quality is why a lot of the retailers have been very supportive of the brand even though we’re quite young.”
Focus on quality
Transparency and quality also rings true for more established companies, said Emme. NOW has systematically been increasing its in-house manufacturing capacity, he said, with the objective being to gain more control over its supply chains.
The NutraIngredients-USA Business Leaders Forum was sponsored by Sabinsa, Soft Gel Technologies, and Virun. The discussion is available for free on-demand. Please click HERE to access the forum.
“We’re doing that to make sure the quality is the best it can be at the best value and we feel that we can do that better than most third party services,” he said. “But the biggest piece of it is that sometimes it’s easier to audit ourselves than it is to audit a third party manufacturer not just for GMP compliance but for compliance for our own specifications and standards.
“It’s unlikely that every single product will ever be brought in-house but we see it as a strategic importance for our industry.”
Retailer shifts
On the subject of the retailers, Twinlab is well positioned to monitor changes given that it sells in all channels of distribution except multi-level marketing, and Tolworthy noted that there are shifts occurring.
“When you look across the brands that support the $35 billion industry you don’t have any one brand that holds a significant piece of the market share, but when you look across the retailers that sell the brands you do have large market share that is held by some of the larger retailers,” he said. “When those retailers slip operationally, that does affect the industry in total.
“The shift in food, drug and mass is beginning to give way on a market share basis to help natural food and specialty, and to an extent the internet retailers. When that happens to a retailer like Walmart it has a large impact on our industry, where they are suffering right now across their dietary supplement category.
“I am seeing a real shift in consumer preference back to hand selling and high touch consumer service that occurs in natural food and specialty.”