Electronic Retailer - January 2012 - 31

Webster dictionary now defines nutraceutical as “a foodstuff (as a fortified food or dietary supplement) that provides health benefits in addition to its basic nutritional value.” That covers vitamins and minerals, protein and probiotics, herbs, Omega-3 fatty acids, some weight-loss products, antioxidants such as beta-carotene, and a multitude of special formulations that promise to promote desirable functions (memory, digestion or sexual vigor) or to treat problems such as osteoporosis, bladder control or joint pain. The vast majority of these substances are either found in nature or created by mixing natural ingredients. They can be taken as supplements or added to foods and beverages by manufacturers, as when milk is fortified with Vitamin D, yogurt with probiotics, or margarine and even peanut butter with Omega-3. But while the term obviously covers a lot of ground, nutraceuticals do not include pharmaceutical drugs that require a doctor’s prescription. The distinction is important, nutraceutical marketers say, because it explains why a lousy economy has been good for their business – at least so far. People who have lost their health insurance along with their jobs, who have watched their deductibles soar or who are counting pennies in general become more concerned with their health for a simple reason: They can’t afford to get sick. And if they do need treatment, they find it hard to pay for expensive prescription drugs. Jonathan Greenhut, CEO of Nutricap Labs of Farmingdale, N.Y., which manufactures nutraceutical formulations for a number of suppliers, agrees with the prevailing view that a sagging economy provides a paradoxical boost to the industry. “People without the money to visit a doctor rely more on nutritional therapy,” he says. “I’m not saying it’s right. But one reason why more people are taking their health into their own hands is because they have to.”

Booming business
Ten-year-old Nutricap Labs made the Inc. 500 list of America’s fastestgrowing private companies in 2009 and 2010. This year, it was still growing

fast, ranking 1,521 on Inc.’s expanded 5000 list. Part of the explanation is that Nutricap is in the right industry for the times, Greenhut says. “I say this cautiously because you never know how 2011 will end up. But despite the [economic downturn], the industry has not had a down year in the past five years.” A study by the Council for Responsible Nutrition, a Washington, D.C.-based trade group, found that the overall nutraceutical market grew by 6 percent in 2009, a very rough year for most industries. But while nutraceutical suppliers agree that sales are healthy and growing, they take such figures with a grain of salt because estimates of the industry’s size and growth rate vary widely. Depending on which study one believes, U.S. sales of vitamins, minerals and other dietary supplements may total anywhere from $11 billion to about $27 billion. When “functional” foods are added to supplements and the global market is counted, the numbers skyrocket. San Jose, Calif.-based research firm Global Industry Analysts pegs the worldwide nutraceutical market at more than $187 billion. The firm predicts that by 2015 global nutraceutical sales will reach $243 billion. Whatever the actual scope of the market and pace of growth, supplement suppliers say that business is good. The fact that nutraceuticals are cheaper than prescription drugs is only one of several reasons, most of which have nothing to do with the economic recession. Another driver, for instance, is distrust of pharmaceuticals, regardless of their cost. The potentially dangerous or unpleasant side effects that can arise from prescription drugs are becoming more widely recognized, observes Katie Williams, president of Ideal Living of Sherman Oaks, Calif., which sells nutraceuticals via direct-response channels. Williams, the 2011 recipient of the Electronic Retailing Association’s Lifetime Achievement Award, points to a cautionary tale that hit close to home. Her mother suffered serious liver damage from Lipitor, a drug that doctors consider relatively safe and “that is prescribed with abandon.” Despite

obvious symptoms that something was amiss, Williams says, her mother’s doctors “couldn’t figure out what was wrong and kept her on Lipitor for several months. Stories like these spur people to find time-tested, safer nutritional alternatives.” To many people, “safer” means “natural,” and most nutraceuticals are natural products. That is another market driver, says William Sandnes, founder of Aminomega Inc. of Belvedere, N.J., a 2011 start-up company that has begun to market an Omega-3 supplement and other nutraceuticals, primarily via the internet. What’s more, Sandnes says, “New science is coming out in support of nutraceutical ingredients all the time.” For instance, he cites recent reports about new research into squalene, a substance found in humans and harvested from sharks. Used for years as an anti-cancer agent and immune system booster, squalene now is being investigated as a treatment for hepatitis and other ills, Sandnes says. Demographics are helping the nutraceutical industry as well, suppliers say. People over 50 are a prime target market for health and wellness products. Thanks to the media and the wider consumer culture, aging baby boomers are very much in touch with health issues and accepting of dietary supplements as a means to promote better health. As Dr. Newton’s Majewski points out, boomers today not only know the difference between good and bad cholesterol, they actually keep track of their cholesterol counts. And healthy eating is marketed to them continuously. “People don’t just see yogurt on the shelves, they see yogurt with probiotics and mayonnaise with Omega-3,” Majewski says. The long and short of it is that “we pay a lot more attention today to what we put in our bodies,” Majewski says. “I know people in their 70s who talk about Omega-3.”

Why DR?
A report from the Nutrition Business Journal, one source of market figures, says that 2009 spending on dietary supplements in the United States amounted to $26.9 billion. About 54 percent of that total came from mass market and 31

January 2012 | electronicRETAILER



Electronic Retailer - January 2012

Table of Contents for the Digital Edition of Electronic Retailer - January 2012

Calendar of Events
Your Association, Your Bottom Line
Industry Reports
FTC Forum
eMarketer Research
IMS Retail Rankings
Jordan Whitney’s Top Categories
Lockard & Wechsler’s Clearance & Price Index
SENSAtional Marketing
When Words Can Hurt
‘Because They Can’t Afford to Get Sick’
Guest Viewpoint
Guest Viewpoint
Inventor’s Corner
Legal
Payment Processing
Member Spotlight
Advertiser Spotlight
Bulletin Board
Advertiser Index
Classifieds
Rick Petry
Electronic Retailer - January 2012 - cover1
Electronic Retailer - January 2012 - cover2
Electronic Retailer - January 2012 - 3
Electronic Retailer - January 2012 - 4
Electronic Retailer - January 2012 - 5
Electronic Retailer - January 2012 - 6
Electronic Retailer - January 2012 - Calendar of Events
Electronic Retailer - January 2012 - Your Association, Your Bottom Line
Electronic Retailer - January 2012 - Industry Reports
Electronic Retailer - January 2012 - 10
Electronic Retailer - January 2012 - 11
Electronic Retailer - January 2012 - FTC Forum
Electronic Retailer - January 2012 - 13
Electronic Retailer - January 2012 - eMarketer Research
Electronic Retailer - January 2012 - 15
Electronic Retailer - January 2012 - IMS Retail Rankings
Electronic Retailer - January 2012 - 17
Electronic Retailer - January 2012 - Jordan Whitney’s Top Categories
Electronic Retailer - January 2012 - 19
Electronic Retailer - January 2012 - Lockard & Wechsler’s Clearance & Price Index
Electronic Retailer - January 2012 - 21
Electronic Retailer - January 2012 - SENSAtional Marketing
Electronic Retailer - January 2012 - 23
Electronic Retailer - January 2012 - 24
Electronic Retailer - January 2012 - 25
Electronic Retailer - January 2012 - When Words Can Hurt
Electronic Retailer - January 2012 - 27
Electronic Retailer - January 2012 - 28
Electronic Retailer - January 2012 - 29
Electronic Retailer - January 2012 - ‘Because They Can’t Afford to Get Sick’
Electronic Retailer - January 2012 - 31
Electronic Retailer - January 2012 - 32
Electronic Retailer - January 2012 - 33
Electronic Retailer - January 2012 - 34
Electronic Retailer - January 2012 - Guest Viewpoint
Electronic Retailer - January 2012 - 36
Electronic Retailer - January 2012 - Guest Viewpoint
Electronic Retailer - January 2012 - 38
Electronic Retailer - January 2012 - Inventor’s Corner
Electronic Retailer - January 2012 - Legal
Electronic Retailer - January 2012 - Payment Processing
Electronic Retailer - January 2012 - 42
Electronic Retailer - January 2012 - Member Spotlight
Electronic Retailer - January 2012 - 44
Electronic Retailer - January 2012 - 45
Electronic Retailer - January 2012 - Advertiser Spotlight
Electronic Retailer - January 2012 - Advertiser Index
Electronic Retailer - January 2012 - Classifieds
Electronic Retailer - January 2012 - 49
Electronic Retailer - January 2012 - Rick Petry
Electronic Retailer - January 2012 - cover3
Electronic Retailer - January 2012 - cover4
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