Vitamin/Nutritional Supplement Market Entering a Battle of Strength
By Laura Klepacki, special to GMDC
After a couple of unhealthy years, sales of vitamins and nutritional supplements are looking rosy again.
A new study released this month from Packaged Facts, a New York-based market research firm, said retail sales will reach $4.7 billion by year end, an increase of one percent. While a modest gain, it is in sharp contrast to a three percent drop in 2005 – when the industry was pummeled by media reports that questioned the efficacy of select vitamin products.
With the help of new products and an aging population, the study predicts the market is poised to skyrocket to $6 billion over the next five years – a 20 percent increase.
The nutritional supplement category presents an interesting retail landscape with supermarkets leading with a 33 percent share, followed by mass at 28 percent. Drugstores, surprisingly, account for a meager percent of sales.
Filling out the field are health and natural food stores at 17 percent, with the remaining 11 percent of volume coming from warehouse clubs, direct selling firms, such as Shaklee and NuSkin, and internet sales, according to the study.
ACNielsen reported vitamin sales at U.S. food, drug and mass stores, excluding Wal-Mart, grew 4.5 percent for the 52 weeks ended October 7, to $3.42 billion, apparently driving the total market growth.
Over the past five years, the above outlets have gained share at the expense of health/natural/vitamin stores, with mass merchants making the greatest strides with an increase of three percentage points, according to Packaged Facts.
It appears, however, the vitamin store segment may be gearing up to take some market share back.
Earlier this month, Pittsburgh-based GNC, the largest specialty vitamin retailer with 4,800 stores, announced it was exploring strategies to infuse cash into the business with a possible sale or an initial public offering. The timing seems well placed as sales at the chain rose 14.6 percent to $1.13 billion for the nine months ending Sept. 30.
New Jersey-based Vitamin Shoppe is also in a growth mode. Now with 290 stores in 30 states, it has another 12 planned this year.
Vitamin World of Bohemia, N.Y. now owns and operates over 550 retail stores nationwide. Through its direct selling operation, it ships some 15,000 packages a day to U.S. households. It hasn’t announced a major expansion plan, but is getting involved in new types of marketing efforts such as the tie-in with radio personality Don Imus to benefit his New Mexico ranch for children with cancer. Vitamin World sells Imus’s organic food products and environmentally friendly household cleansers with proceeds going to the charity.
Discussion Questions: What will the competitive battle
in vitamin and nutritional supplement products mean for consumers? Is this competitive
situation likely to prompt the mass market channel retailers to engage in greater
education and organization of their vitamin departments to counter the specialist
segment? Will the mass market retailers now focus on the vitamin category with
more and better marketing and merchandising?
Education is a relative term in this context. As long as there is an ageing population, there will be customers for nutraceuticals and supplements and any old pill that people believe will help them to live better for longer. Believe is the operative word and if you think education makes people believe then that’s the way forward. As one who is obviously cynical about the value of dietary supplements for the majority of people (while granting that some pills may work for some conditions in some people although it is hard to measure and the evidence is not, to my mind, sufficiently convincing), I think supermarkets will gain market share as customers pop them into their shopping baskets along with everything else they’re buying. As conviction in their benefits grows, so too will the number of people wanting to buy them in mainstream outlets. These are not the same people who would normally shop in specialist vitamin stores.
This is a very interesting question, as we will have to wait and see if this current upswing of nutritional concern is indeed a fad — or part of a longstanding interest in long-term health.
There’s a group called Age Wave that is completely focused on the aging of America. I read their initial book around year 2000 and much of it felt like a peek into the future. As they share, Aging America is frustrated that they are being ignored in favor of younger America. They want to be recognized, respected and have their needs met. They are going to redefine what retirement means and, as they age, are more and more concerned with making sure that they feel good and live long, healthy lives. And, in 10 years or so, they will have a huge share of discretionary spending.
If this points to a potential foundation for a health-driven segment — not a short term “diet fad segment” — I feel that the winner is going to be the retail faction that best meets their needs. Like most other retail challenges, we must understand how to best connect with the emotional and rational desires of this category of shopper and find innovative, service-oriented methods to connect with them. This may cover off on the products we merchandise, education on those products, in-store events or even in the actual product development of new supplements. If you’ve ever seen or used EmergenC for colds — now available with a plethora of additional supplements — you’ll see an example of this innovation.
We’ll have to wait and see how this trend evolves…but I’m putting a personal bet on its long-term viability and opportunity.
I would sincerely hope that someone makes an effort to educate the consumer about these products. Frankly, they have always seemed to be lodged between “snake oil” and “witchcraft.” There would seem to be little if any governmental oversight and frankly I have a hard time trusting retailers who devote hundreds of feet of shelf space to creatine. I think the retailers who are doing well with this category are the retailers consumers trust. I would expect that the growth of pharmacy in the supermarket category has had much to do with the growth of supplements and vitamins in that segment. Frankly, GNC and some of the specialty retailers don’t seem to have much rapport with consumers beyond weight lifters. I think they will find it hard to grow their business to new consumers unless they find a way to convince the consumer they have a better quality product and get the “nose-ring” crowd off the register.
As much as the pharma industry works overtime to discredit the nutrition industry, there is much to it beyond snake oil. For every dodgy product advertised on infomercials, a dozen products have been proven with double-blind, placebo-controlled studies, and an increasing number of MDs are recommending them. Glucosamine-chondroitin for joint pain, essential fatty acids like flaxseed or fish oil (for a host of ailments from high cholesterol to ADHD), vitamin E for hot flashes, melatonin for sleep are just a few.
Nutrition and alternative medicine are niches where the small retailer continues to stand a chance because they require a knowledgeable, consultative sell. Consumers trust independent health food and vitamin stores, supernaturals such as Wild Oats with trained personnel in their Holistic Health section, and integrative pharmacies such as Pharmaca — which employs pharmacists and naturopaths and teaches each one to respect the province of the other.
Vitamins and nutritional supplements (“nutraceuticals”) are a fad-driven business. Susceptible consumers read the publicity, which is usually has a “science” or “research” story. It helps if a charismatic leader or spokesperson is involved. Testimonials are needed because nutraceutical consumers crave mutual validation. Every few years, a prominent fad reaches beyond the usual noise, powering major sales increases for the category. Retailers who are serious about this business need to generate their own fads, with their own charismatic leaders, “research”, and testimonials. Without the media manipulation, the retailer can only hop onto fads created by others, at a lower profit.
The question suggests that they are doing a bad job of marketing/merchandising these products. I’m not sure that’s true (it may be, but I haven’t seen any data to suggest they are doing a bad job). Can they do better? Sure – but I’m not sure that section resets are the answer. Maybe better locations in the store would be a more suitable avenue to pursue.