Selling Health Food and Nutritional Supplements in China

NNFAOn March 16, 2006 at 7:00 p.m. EST the National Nutritional Foods Association in conjunction with the US Dept. of Commerce presents Selling Nutritional Supplements in China: The Market, Regulations & Best Practices for Success, a live 1 1/2 hour webinar. The cost is $45, but NNFA members who enter NNFA as the promotional code get $5 off. To register, click here.

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Joel B. Rothman represents clients in intellectual property infringement litigation involving patents, trademarks, copyrights, trade secrets, defamation, trade libel, unfair competition, unfair and deceptive trade practices, and commercial matters. Joel’s litigation practice also includes significant focus on electronic discovery issues such as e-discovery management and motion practice relating to e-discovery.

Joel B. Rothman represents clients in intellectual property infringement litigation involving patents, trademarks, copyrights, trade secrets, defamation, trade libel, unfair competition, unfair and deceptive trade practices, and commercial matters. Joel’s litigation practice also includes significant focus on electronic discovery issues such as e-discovery management and motion practice relating to e-discovery.

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  1. kirozila said:

    Nutritional Supplement Market At a Crossroads

    The U.S. market for nutritional supplements is shifting inexorably toward stricter governmental regulation, from the implementation of GMPs (Good Manufacturing Practices) and more stringent requirements for AERs (Adverse Event Reports), to the proposed registration of all supplement manufacturers and the burdens of the Bioterrorism Act. In the 20 years since the passage of DSHEA (Dietary Supplement and Health Education Act), the industry has not come up with an effective way to police itself, despite the sincere efforts of leading industry associations to do just that. As a result, supplements making unsubstantiated claims continue to appear on a daily basis, and while few of these products are actually unsafe, their presence on the market is unethical from a business standpoint and unfair to consumers. Given the therapeutic claims made by many nutritional supplements—from cancer support to penile enlargement—it is remarkable that the government has not cracked down sooner, even if such products claims are couched with the standard “not intended to treat, diagnose, cure, or prevent any disease” and “these statements have not been evaluated by the FDA” disclaimers.

    For the industry as a whole, the most important effect of increased regulation will be a continued shift of power into the hands of a mighty few. Product testing and development is costly and will only become more so, meaning that most smaller marketers, who usually prefer to spend their budget on marketing, will find it increasingly difficult to meet the new requirements. The resultant power shift will therefore be a function of many smaller supplement makers exiting the field, with others—fortunately including many of those with truly worthwhile products—being swallowed up by larger companies able to back them with product testing, certification, and marketing support. Established names like One-A-Day and Centrum could easily grow from multiproduct lines to extended brand families encompassing dozens of products, with increasingly esoteric ingredients finding a place at the mass-market table. In other cases, mass-market leaders whose presence is not yet significant in the health/natural sector will field separate new divisions (as Wyeth already does with Solgar) to cover that side of the business.

    While this may be bad news for smaller companies unable meet the new demands, it will likely be beneficial for the market as a whole, at least from a strictly bottom-line perspective. That is, as nutritional supplements are increasingly sanctioned by the government and backed by known companies with strong brands, consumer confidence in the products will go up, and so will sales. The bad news for consumers is that part of this sales hike will stem from higher prices, as the largest companies become increasingly capable of naming their own prices for product types that were previously widely available at more competitive prices.

    Currently, much of the research into nutritional supplements is funded by the National Center for Complementary and Alternative Medicine (NCCAM), and this agency recently indicated an intention to shift its focus from clinical trials to more basic pharmacological/mechanistic research. At the same time, more and more companies are funding their own clinical trials on their own products, with the goal of developing proprietary formulas. That most nutraceutical ingredients have originated from an herb or other plant suggests this is the area of greatest new product potential. According to Brien Quirk, technical director for Draco Natural Products, a leading plant ingredient supplier, “Increasing study of the biochemistry of existing or new phytocompounds will provide the impetus and basis for new product development. Traditional herbal medicine may also provide new ingredients to use in whole extract form, even if it is not known which compound is responsible for the activity.” Among the most recently introduced patented plant-based ingredients is Cargill’s CoroWise (www.corowise.com), a plant sterol found in GNC’s new Preventive Nutrition Heart Advance Softgels, as well as in beverages like Minute Maid’s Premium Heart Wise orange juice.

    Another important new ingredient, also from Cargill, is Regenasure, a glucosamine hydrochloride derived from the fungus Aspergillus niger. Cargill developed the ingredient in response to growing demand for an alternative glucosamine source in Europe, which is facing a shortage of raw material production (i.e., mainly shrimp). Launched in fall 2003, Regenasure is the only glucosamine being produced in the United States, and several major U.S. marketers are expected to introduce new products formulated with the new ingredient within the next few months. Because of Regenasure’s “shellfish-free” formula, along with its vegetarian and kosher status, products boasting it will carry a distinct market advantage over traditional glucosamine products, given the recent passage of the Food Allergen Labeling and Consumer Protection Act (FALCPA), which requires all U.S. food and beverage producers to include more prominent allergy warnings on their products by January 2006.

    For at least a decade functional foods and beverages have been subtly encroaching on the turf of nutritional supplements, but this trend is picking up steam, driven by recent media reports citing scientific studies showing that foods may be better delivery systems for certain nutrients, and by functional foods’ trendier and more user-friendly incarnation as “phoods.” As a result, just as food and beverage marketers have been morphing their products into phoods, so are a growing number of nutritional supplement makers morphing their products in phoods. This is especially apparent in the area of calcium supplements, where products like McNeil/Johnson & Johnson’s Viactiv “soft chewables”—which come in tempting flavors including Milk Chocolate and Strawberry Cream, as well as in new resealable “To-Go Packs”—are making big inroads; and in kids supplements, where products in candy form (chewing gum, taffy, gummies) are gradually unseating the standard “chewables.” Opportunities also lie in the licensing of famous-name supplement brands for usage on foods and beverages, although not even the biggest name can guarantee success. For example, after entering the foods bars market with its Centrum brand, a cool reception for the product forced Wyeth to withdraw.

    Omega-3s are now widely accepted for their ability to help reduce the risk of cardiovascular disease, but a growing body of research is supporting additional benefits—including the ability to fight arthritis, improve brain function, support eye health, and relieve depression—yielding major opportunities for new supplement types. A U.S. Senate committee reported in July 2003 that “learning disabilities and behavioral disorders have been linked to low serum levels of Omega-3 fatty acids” and that, therefore, “particular attention should be paid to developing food choices that are high in Omega-3 fatty acids.” More recently, on September 15, 2003, the FDA decided to allow food companies to make qualified health claims about the heart-healthy benefits of certain Omega-3s on their packages. Although this ruling does not pertain to nutritional supplements made with Omega-3s, it seems certain to give them an additional shot in the arm. Companies already pushing the health claims of Omega-3s in new directions include Natural Factors, whose Learning Factors supplements are made with the essential fatty acids and promoted as “ideal for children as well as adults who want to enhance their mental focus naturally and safely”; and Nordic Naturals, whose Omega Woman supplement is claimed to assist in maintaining hormonal balance.

    For more information on the global market for nutritional supplements, check out the following Packaged Facts report:

    http://www.chartsbank.com/DiagramCategory.aspx?CategoryID=41

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