Our Market / Healthy & Growing
Proactive Consumers
Consumers of nutrition products are demographically diverse: a young mother who wants a healthy baby, an older man with a prostate problem, a young man trying to bulk up to make the team, a middle aged woman worried about osteoporosis. What they share is a proactive approach to managing their diet and health through better nutrition. This proactivity, shared by the approximately half of the U.S. adult population that uses nutraceutical and functional food products, makes this an attractive group for marketing new products.
A High Level of New Product Introduction
Hundreds of new products are introduced into the nutraceuticals market each year. Costs for test launch are relatively low, retailers expect product innovation from brand providers and consumers in the category are constantly on the lookout for the next hot new product. Many of these product introductions fail, but there are breakthrough successes each year, making the continued effort worthwhile for both retailers and brand providers.
Fragmented Brand Providers
There are thousands of brands of nutraceuticals products, few of which have widespread consumer recognition. This cornucopia of brands provides an overwhelming array of choices for new consumers entering the category. Consumers quickly learn to rely heavily on their own research, label claims and “back panel” nutritional information to make informed decisions.
Few Strong Brands
Unlike almost every other mature consumer product category (e.g. soft drinks with Coke® and Pepsi®), there have not yet emerged any real “consolidator” brands in the nutraceuticals category. This can be attributed to the early-stage maturity of the category, the diverse set of brand positionings within the category and the relative paucity of advertising and marketing applied to nutraceutical products to date. Lack of strong branding also results in the heavy use of “borrowed science” and knockoffs among current players in the category.
Brand Specialization by Channel
Consumer brands in the supplements category tend to be dedicated to a specific channel, with little or no crossover to other channels (e.g. Solgar® in specialty retail, Centrum® in FDM, Herbalife® in MLM). This makes supplement brands difficult to grow beyond the confines of one channel and entrenches the current fragmentation of essentially similar brands. Functional foods do not have this problem, since they are sold almost exclusively in the massive FDM channel.
Evolving Regulatory Environment
The regulatory environment for nutrition products is continually evolving. Claims for marketing and labeling are more clearly regulated and the dietary supplement business is governed by a defined set of rules laid out in the Dietary Supplement Health and Education Act. In late 2002, the U.S. FDA loosened its rules on health information and claims on food products, as part of an effort to encourage healthier eating habits among increasingly overweight Americans. Now there is discussion of tightening the rules, requiring manufacturers to provide more evidence before making label and marketing claims. This evolving regulatory environment makes science-based efficacy important for companies operating in this category.
Category Growth
Consumer demand for nutraceutical and functional food products is strong and growing in the United States and around the world. Category growth in this range is projected to continue at significantly above the general food category and well in excess of inflation for the foreseeable future, evidence of continued strong consumer demand.
Proactive People
The impact of diet on health is now much more clear to consumers. Fifty or one hundred years ago, few people made a strong connection between what they ate and how they felt, looked and lived. This link between diet and health is now viewed as common sense. In fact, 58% of Americans equate diet and disease, according to a recent Prevention survey.
Today’s consumers, especially the aging baby boomer, are willing to experiment with their own nutrition program to improve health and find out “what works for me”. The baby boom generation is feeling the effects of middle age and is willing to try almost anything to delay the onset of old age. Mistrust of the sickness-oriented medical system and a healthy dose of proactivity and self-responsibility fuels a willingness to try new things, especially if they are natural and preventive.
Science Rules
Consumers are more demanding of proof. Scientific studies on nutraceutical ingredients are being conducted at an increasing rate. As these studies are published, both favorable and unfavorable findings are being communicated to the consuming public. Many of these findings are positive, but hearing that some supplements don’t work has made consumers skeptical of label and advertising claims and demanding of proof. They are willing to do their own research, take substantial time to make a supplement purchase decision and are loyal to the products that deliver benefits. Thus, scientific validation of bioactive ingredients are critical to future product success.
With proof, demand for what’s new is strong. Consumers in this category want to stay on the leading edge and enjoy discovering new products that meet their needs. Just as no one wants to work with an outdated computer, nutraceutical consumers don’t want anything but the latest and best technology, and that means new products.
Safety Concerns
Public awareness about food quality and safety is at an all-time high. High-profile food contamination problems, national product recalls, and diseases from domesticated animals have created a fear of food quality in America and Europe. Consumer backlash against genetically engineered foods, increasing awareness of long and unmonitored food supply chains and media speculation about agricultural terrorism adds to the public concern. This new consumer awareness is driving the rise of local, organic and natural products. The underlying food quality and safety concerns are a significant factor in the design of all new product launches in the nutrition business.
The Food Factor
There a strong trend toward food forms for nutrition products. Nutraceuticals have historically been a pill business. However, both the more recent availability and popularity of fortified and functional foods and a better popular understanding of the importance of macronutrients (protein, carbohydrate, and fat) to a healthy diet have changed the nutraceuticals business. Food bars, functional beverages and other functional foods have gained popularity with consumers, growing much faster than the pill segment of the nutraceuticals market over the past five years.
Expanding convenience is broadening the market. Convenience is a major driver of consumer choice in the nutraceuticals category. Time-pressed consumers are often “conditionally health conscious” and will select healthier alternatives when available. Much of the growth in functional food sales has resulted from simply offering a healthier alternative to available choices (e.g. Balance Bar vs. Snickers). Further growth from expanding consumer choice will broaden the nutraceutical and nutritional food category for years to come.
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