The past five years has been a busy time in the natural products industry. Here are some key issues that have developed since 2009, and had profound effects on the industry. Commenting on these issues are WholeFoods columnists Richard A. Passwater, Ph.D., author of Vitamin Connection; Legal Tips writer Scott Tips, president of Natural Health Federation; and Merchandising Insights author Jay Jacobowitz, founder of Retail Insights.
Supplements Safety Questioned, Again and Again
From negative media reports to investigations by Congressmen, supplement safety was thrust into the limelight too many times to count over the past five years.
Possibly the most high-profile instances were in the sports/bodybuilding supplements and energy support categories. With the former, many groups wanted to rein in steroids masquerading as illegal supplements for sale on the market. But it was the U.S. Anti-Doping Agency (USADA) that incriminated the entire supplements industry with its Supplement Safety Now coalition, followed by Senator John McCain (R-AZ) with his Dietary Supplement Safety Act of 2010.
Soon, the focus shifted to DMAA, an ingredient used in sports supplements. USADA banned it in 2010, and reports surfaced worldwide of serious side effects and death in those using the supplements. That year, we saw class action lawsuits against GNC and others for selling these supplements. Then in 2011, the deaths of two military personnel were blamed on cardiac arrest caused by DMAA. In 2012, FDA sent warning letters to DMAA makers, following by seizures in 2013, and finally a warning to shoppers to stay away from DMAA.
Meanwhile, energy drinks and supplements made headlines. In 2012, FDA linked one energy drink to at least five deaths in a three-year period and released its findings that 90 adverse events (filed 2009–2012) and 13 deaths were associated with another. Other brands had equally disturbing AERs. Then, Consumer Reports printed a report claiming the caffeine content in many drinks is mislabeled.
Senator Dick Durbin, (D-IL), an outspoken critic of the Dietary Supplement Health and Education Act (DSHEA), and Senator Richard Blumenthal (D-CT), asked FDA to look into the matter. The lawmakers also asked 14 energy drink makers to provide specific information about their products, while several medical associations voiced opinions on appropriate caffeine consumption levels for the public.
Durbin and company pushed for more regulation of energy drinks and the entire supplements category, justifying their case with the deaths linked to energy drinks. Their anti-supplements legislation was voted down.
What are the potential targets moving forward? “Follow the money,” says Jacobowitz. “From trumped-up charges on tryptophan to misinterpreted study data on vitamin E and omega-3, the biggest targets will be those natural, non-patentable supplements with the highest dollar sales that reduce demand for patentable, proprietary drug ‘remedies.’”
DSHEA Under Attack
Throughout the past half-decade, industry members have increasingly felt that the DSHEA is under attack. Many industry members felt FDA’s draft New Dietary Ingredients Guideline released in July 2011 was one of the biggest recent threats to the industry. In this draft legislation, FDA would have required all dietary ingredients introduced into the marketplace since October 15, 1994 to have an FDA notification filed (meaning safety testing prior to marketing, extra costs, a backlog for FDA review and countless products off the market).
Eventually in 2012, after receiving a boatload of comments from the industry, FDA agreed to revise the draft.
At the same time, industry champion Senator Tom Harkin (D-IA) has announced his retirement, leading many to wonder who will look out for this industry on Capitol Hill.
Tips says we have to be assertive about defending DSHEA against two looming threats. “Look primarily for yet more legislation calling for the consumers to be ‘protected’ with expensive and burdensome rules and regulations that will increase costs to consumers and reduce product choice,” he says. “Or, there could arrive the day when U.S. treaty obligations will impose harsh international standards and guidelines upon Americans, effectively eliminating DSHEA in one fell swoop.”
Tips says it will take both trade groups and consumer organizations to help us win in the end.
Consolidation of Brands, IPOs
From 2009–2014, industry saw numerous mergers and acquisitions. The ones with the strongest reverberations in the industry were those in which an independent company moved under the umbrella of a large, mainstream corporation. One of the most surprising was Proctor & Gamble’s purchase of New Chapter, but there were many, many others, like: Pfizer buying Alacer (maker of Emergen-C), General Mills purchasing Food Should Taste Good, Dole buying Mrs. May’s, Bayer eating up Schiff and more.
Meanwhile, there was the trend of the big growing bigger, such as Atrium’s purchase of Garden of Life and Nutri-Health, KeHE buying Tree of Life, Vitamin Shoppe picking up Super Supplements, Martek’s acquisition of Amerifit (and then DSM’s purchase of Martek and Ocean Nutrition), BASF buying Cognis, Dupont’s purchase of Danisco, Sprouts’ absorption of Henry’s and Sunflower Market, and others.
Jacobowitz believes the trend of mergers and acquisitions will be ongoing: “Consolidation is a force of nature, and will continue. The industry is still very fragmented, and some consolidation is in order, and is a good thing.”
Over the past half-decade, many IPOs were also announced, including GNC, Vitamin Shoppe, Sprouts Farmers Market, Annie’s Inc. and others.
Backlash Mounts against GMOs
The past five years have seen incredible interest in the non-GMO movement. The Center for Food Safety (CFS) spent about five years fighting Monsanto in court on behalf of alfalfa farmers about the unintentional spread of GM seed. In 2007, the courts agreed with CFS (which resulted in a ban of the crop), and then after Monsanto appealed, the courts again agreed with CFS in 2008 and 2009. In 2010, the Supreme Court ruled in favor of Monsanto, reversing some lower court decisions, but also held the ban on GMO alfalfa.
In October 2011, more than 1,000 retailers marched in front of the White House to voice their opinion that GM ingredients should be labeled as such. Two high-profile ballot initiatives were voted down by close margins in California (in 2012) and Washington (in 2013), which would have required the labeling of GE ingredients. While it has yet to take effect, Connecticut became the first state to pass a state-wide GM labeling law in 2013.
In another monumental case, the Supreme Court ruled in 2013 (Bowman v. Monsanto) that farmers cannot legally save patented genetically modified seeds for replanting. Some say this ruling gives Monsanto even more power over the U.S. food supply.
Companies were sued over using the term “natural” on foods that likely contained GM ingredients; in 2013, PepsiCo removed the term “natural” from its marketing for this reason. And, industry and shoppers alike told FDA not to allow the sale of GM salmon. Several grocers signed a pact in 2013 not to sell such fish in their stores.
Meanwhile, some natural retailers vowed to ban GM ingredients in their stores while others (like Whole Foods Market) created mandatory GM labeling guidelines for products that will be sold on their shelves in the future. Many companies are reformulating to be GMO free, notably General Mills making Cheerios a GMO-free product in early 2014.
Tips makes a prediction: “The non-GMO movement will grow in force as even more problems with GMO foods are revealed.” He believes “previously hidden data condemning GMO foods will surface that will turn more of the general population against such foods.”
Increasing Consumer Interest in Gluten-Free, Organic and Sustainability
As food allergies and intolerances are on the rise, individuals are increasingly looking for “-free” foods for sensitive diets. One of the biggest areas of interest is gluten-free products, now a multi-billion dollar industry that is expected to hit $6 billion by 2017. FDA has now stepped in to offer an official definition of “gluten free” for the first time, which has many shoppers leaping for joy.
Says Passwater, “I do think that gluten-free has become a stable commodity for health food stores, but I think it will diminish in mainstream supermarkets due to fierce competition for shelf space from non-health products.”
As the media questioned throughout the past decade whether organic was nutritionally superior to conventional, shoppers spoke with their wallets. They chose organic for a number of reasons, from environmental concerns to the avoidance of chemicals to a better feeling of food safety.
“Demand for organics will expand within the mid-level consumer segment, which is consistently getting deeper into the healthy lifestyle, which includes eating. Sustainable is a macro force, like an iceberg; it moves slowly, but you can’t stop it,” says Jacobowitz.
In general, it’s safe to say that natural and sustainable is very much a priority of U.S. shoppers. Even during the rocky economic times of the past five years, sales growth of natural supplements and foods outpaced conventional, and will likely continue to do so in the coming years despite competition from mainstream outlets. WF
Published in WholeFoods Magazine, February 2014