Category Review - Vitamins & Supplements

Vitamin Category Ripe for Private Label

August 28, 2012
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Many categories of private label vitamins and supplements are ripe and ready for growth. 
Probiotics, antioxidants, condition-specific supplements, and natural and holistic solutions will be among the consumer-driven trends in vitamins and supplements in the coming years, and private label brands will be poised to compete with national brands so long as they stay innovative, according to analysts those who work the category.
For the 52 weeks that ended June 10, the vitamin category saw growth of 5.4 percent vs. a year earlier, reaching $3.6 billion in sales, according to SymphonyIRI Group, Chicago. Liquid vitamins and minerals grew the fastest, up 14.2 percent to $230 million, while mineral supplements had the highest sales volume at roughly half the category, $1.8 billion. Private label sales shrank 4.6 percent overall, to slightly over $850 million.
Euromonitor International, Chicago, measured 6 percent growth in the broader vitamin and dietary supplement category in 2011, reaching $22.1 billion in sales, and Euromonitor forecast the market would hit $26.8 billion in 2016.
No short list of brands dominates the category, with the five largest companies only accounting for about one-fifth of the value share, the company says. Sales of tonics and bottled drinks grew 29 percent in 2011, to reach $1.3 billion.
The vitamin subcategory in Euromonitor’s report showed sales up 6 percent to $9.1 billion, led by “explosive growth” of Vitamin D, which rose 25 percent and should top $1 billion in sales alone by 2014, the company predicts. Sales of Vitamin B rose 8 percent to $1.5 billion in 2011, while pediatric vitamins and supplements grew 3 percent to $479 million.

Areas of Growth

Euromonitor reported a bifurcation of vitamin pricing into high-end specialty shops such as GNC and Vitamin Shoppe, which charge a premium for targeted regimens, alongside mass merchandisers offering discounts to entice lower-end shoppers and make it up on volume. Shelf space has grown for condition-specific formulations such as heart health, memory and energy enhancement, the company says.
The dietary supplements subcategory grew 4 percent to $11.2 billion, Euromonitor says, with movement toward more advanced formulations that offer “more discernible health claims.” The company reported double-digit percentage growth in probiotic supplements (22 percent to $769 million), fish oils (11 percent) and Omega 3-6-9 (18 percent).
Kenn Israel, vice president of marketing for Robinson Pharma, Inc. in Santa Ana, Calif., sees probiotics and advanced formulations of Omega 3 products as especially promising areas for growth category-wide, and specifically in private label.
“Gone are the days of me-too,” he says. “For private label brands to be successful, they need to provide a same-as-or-better product. The consumer has gotten very smart, and frankly the lines have blurred with regards to where innovation happens. They expect private label brands to be the innovators. ‘Good enough,’ isn’t.”
To stay on the leading edge, private label manufacturers should maintain a close relationship with key ingredient vendors and invest heavily in quality systems, Israel says.
“We’re staying close with our partners, trying to be as sensitive to their needs as we can, and looking at who the ultimate client is and analyzing data from them,” he says.
Retailers need to mine their in-store marketing data and leverage what they learn “making relevant offers to the consumers,” he adds. “The store should know exactly what’s selling, where and when. Getting out in front and responding rapidly to those changes is absolutely critical.”
Euromonitor predicts that continued high unemployment and the expensive, fragmented health insurance market in the U.S., combined with Americans’ relatively free access to vitamins and dietary supplements, should ensure continuing growth in interest in preventative care.
Although suffering occasional recalls and “flash in the pan” products, the category should stay stable. Internet sales have grown to 14 percent of the category, while warehouse clubs accounted for 11 percent sales and mass merchandisers fell slightly to 10 percent.
Peter Sokoloski, private label manager at NOW Foods in Bloomingdale, Ill., says growth in dietary supplements “kicked in when the economy started to slow down around 2009.” He sees particular promise in antioxidants and anti-aging supplements, along with condition-specific supplements for digestive health, heart health, and weight control.
Euromonitor reports that calcium supplements grew 3 percent to reach $1.3 billion in 2011 while supplements for eye health grew 8 percent, and protein powder intended to retain muscle mass — a growing concern for Baby Boomers — grew 9 percent.
To be successful, private label must “offer retailers both the basic commodity-type items, as well as unique SKUs that they can hold into their own,” Sokoloski says. “If you have a wide product selection, this allows stores the opportunity to get products that fit their particular identity. A track record of quality and rigorous [current good manufacturing practice] adherence are also key.”
And he urges retailers to spruce up their packaging, which often looks too homemade.
“Make sure your label looks professional and has as much information, if not more, than a similar offering from a national brand,” he says.
Jason Provenzano, president and founder of Nutricap Labs in Farmingdale, N.Y., expects continued growth in weight loss and body building products, natural and holistic solutions, and specific ingredients such as Raspberry Ketones and Green Coffee Bean Extract.
“People are always in search of the next big thing when it comes to a quick-fix solution for them to preserve their youth, which includes beauty, virility and energy,” he says. “Any product that helps provide the image of looking better will remain popular.”
Provenzano believes the rising cost of health care and greater education about preventive care will help buoy the category.
“Consumers are now more and more apt to seek out nutritional products to help conditions that they previously thought were only treatable with pharmaceuticals,” he says.
Private label companies need to keep abreast of consumers’ interests and their customers’ desires to stay successful, Provenzano says.
“Offering our customers lower start-up costs for inventory is a huge benefit, especially for a start-up. It allows our customers to not only be more competitive in the marketplace, but they can also spend more capital on marketing,” he says, adding that products on the shelf and point-of-purchase displays need to have “curb appeal” in the same way a house does to catch shoppers’ eyes.
Going forward, Euromonitor predicts 4 percent annual growth for the category, reaching $26.8 billion in sales by 2016, fueled by tonics and bottled nutritive drinks, vitamin D, and omega 3-6-9 products.
Probiotics should lead the category with growth of about 14 percent, thanks in part to heavy investments by The Procter & Gamble Co. and Bayer Corp. Trends toward healthier living and proactive health management, coupled with the greater and more publicly available knowledge on those subjects – as evidenced by the popularity of Dr. Oz, for example – will help to ensure this growth, Euromonitor says.

Causes for Concern

Concerns for the category include the rise of fortified and functional foods – which could cut into the need people feel to take vitamins and supplements – discounting and price competition among mass channel retailers, and the maturing of certain products, in particular vitamin E. Euromonitor predicts vitamin E will suffer a 3 percent annual loss through 2016 in part because of bad press about over-supplementation and toxicity.
“Challenge No. 1 is that some marketers are putting price in front of quality,” Israel says. “This can lead to offshoring the supply of product and exposure to risk as a result of that strategy.”
He specifically mentions cases where Chinese manufacturers used technical-grade rather than food-grade gelatin in making gel-caps, which allowed for the introduction of carcinogenic contaminates.
“The urge to cut corners to save a few cents per thousand on capsules led to some very irresponsible behavior. That type of risk-taking can destroy the entire category,” Israel says, expressing the fear that “a few bad apples” could lead to a demand for regulatory overreach. “Most of the players are very responsible and compliant in how they approach the regulatory environment.”
Similarly, Sokoloski sees the most significant challenges as “finding quality raw materials and also defending our industry from unwarranted efforts to increase government regulatory of a category with a well-documented safety record.” 

Eye On The National Brands

Pharmative introduced NatureMade Adult Gummies, which includes a B-complex, calcium, Co-Qu10, multi-vitamin and vitamins C and D3 offerings.
Nordic Naturals introduced Algae Omega, a solution for vegetarians seeking the health benefits of marine omega-3s.
Jarrow Formulas launched PhosphOmega, a phospholipid-omega-3 fatty acid complex that is said to have higher bioavailability than ordinary fish oils.


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