Sales in Mass Market Channel Show Continued Decline

Total sales for herbal dietary supplements (HDS) have shown continued growth for most channels of trade, indicating a steady increase in both 2005 and 2004, compared to 2003. Unpublished sales statistics gathered from various primary and secondary sources by Nutrition Business Journal (NBJ) demonstrate a 3.4% increase from 2003 to 2004 and an additional 2.1% increase in 2005 compared to 2004 for all HDS aggregated for all sales channels (see Table 1).

Despite the generally upward trend for all aggregated sales, HDS continued their generally downward trend in the mainstream market (i.e., food, drug, and mass market retailers, referred to as FDM) in 2005, with total herb sales in that channel being about 3.67% lower than sales for the same category in 2004, according to information provided by Information Resources Inc. (IRI) of Chicago (see Table 2). The IRI data, considered by most knowledgeable observers as probably the most reliable econometric sales data available on herbal supplements for this particular channel does not include sales reports from Wal-Mart, Sam's Club, and other large warehouse buying clubs, or sales from convenience stores. If such additional sales data were available in the IRI reports, the total level of sales for HDS in 2005 reported by IRI ($249,425,500) would possibly be at least twice the reported figure, since Wal-Mart alone has been termed the largest retail seller of dietary supplements in the United States.

To understand the relative significance of the IRI data, as well as the aggregate sales data compiled by NBJ, it is essential to recognize that HDS are sold in the United States through a variety of market channels. These include the following: health and natural food stores; FDM as well other outlets in the mainstream market (e.g., warehouse buying clubs); convenience stores; mail order, radio and television direct sales, and Internet sales; companies that sell directly to the consumer (often called network marketing or multi-level marketing [MLM] companies); health professionals in their offices (e.g., acupuncturists, chiropractors, naturopaths, some conventional physicians, et al.), and other smaller channels.

Due to this wide variety of sales channels and the lack of accurate econometric tracking services for these channels (as is available from IRI in the FDM channel), it is difficult to accurately measure the precise level of sales of HDS in the United States. During the past 10-15 years, some of the most precise sales data have come from the FDM channel due to the fact that the sales of herbs are reported by cash register and computer scanning data to companies like IRI (http://us.infores.com/) and AC Nielsen (http://www2.acnielsen.com). According to IRI data, as has been reported in HerbalGram for the past 10 years, the 20 herbs that have enjoyed the top levels of sales in the United States in 2005 are shown in Table 2 (the top 20 herbs sometimes varying from one year to the next). It bears emphasis that the total sales of herbal dietary supplements in the FDM channels constitutes an estimated one-sixteenth of the total market for herbs in the United States, according to aggregates of the total sales of HDS in the US market as compiled by NBJ. Readers are thus cautioned not to utilize the IRI sales statistics in Table 2 without giving them proper context.

As shown in Table 2, of the top-selling 12 herbal dietary supplements, 9 indicate lower sales in the FDM channel in 2005 compared to the previous year. This is consistent with the total of all herbs sold in 2005 in FDM, calculated at $249,425,500, or a 3.67% drop compared to 2004. During the past 7 or 8 years, sales in the FDM channel have suffered a continual decline, punctuated by spikes in sales for several herbs that have experienced surges due to increased demand stemming from positive publicity from clinical trials, market promotions, and/or other social trends (see Table 3).

For example, Table 2 indicates that sales for 3 herbs increased in 2005 (cranberry, milk thistle, green tea). The most dramatic increase (94%) occurred with green tea, the public perceptions of which are influenced by growing publicity about the herb's strong antioxidant activity. (These statistics do not reflect the increase in green tea sales as "teas," i.e., as beverages; this relates to HDS only. Green and white tea beverage sales rose 18% in 2005, from $136,041,305 in 2004 to $160,258,650 in US natural supermarkets and conventional food/drug/mass market stores [excluding Wal-Mart], according to SPINS, a market research and consulting firm for the Natural Products Industry).³

With respect to the total market estimated sales, the NBJ statistics indicate that there has been an increase in herbal combinations in 2004 and 2005. Table 4 shows a 5.0% increase in combination formulations in 2004 and another almost equal (4.8%) rate of growth in 2005, after what appears to have been a precipitous decline of 18.6% from 2002 to 2003. The reduction is possibly due to the falloff in sales of Metabolife¨ 356 and a number of other ephedra-containing combinations during the period where significant adverse publicity was generated about ephedra (Ephedra sinica Stapf., Ephedraceae) in general (and its banning in HDS by the Food and Drug Administration), and the Metabolife product in particular.

Single herb HDS have not fared as well as combinations, according to the NBJ data. Singles (aka monopreparations) enjoyed a 3.2% growth rate in 2004 and a slight decrease of 0.7% in 2005.

Other channels of trade have experienced a more stable growth pattern with sales in the health food/natural food store channel generally being the most consistent over the past decade (see Table 5). Direct, or non-retail, sales have also performed better than the mainstream market but have not been as consistent, although they did outperform natural channel sales in 2005, mainly due to growth by MLMs. The better sales performance in natural and in direct sales channels is principally due to the fact that the so-called "core shopper," the consumer who has a relatively strong commitment to the philosophy underlying the natural products and natural health lifestyle—i.e., "natural is better"—are more willing to continue purchasing and using herbal supplements despite negative media stories about lack of effective regulation, safety concerns, or results of negative clinical trials. On the other hand, much of the consumer demand in the FDM channel comes from what marketing consultants refer to as "peripheral shoppers," consumers who are more mainstream and less committed to the natural health philosophy; these consumers are more easily influenced by negative media reports and are thus presumably less willing to continue to purchase an herbal supplement in the face of growing negative publicity. In addition, the mass market had a significantly stronger dependence on the former availability of ephedra-based weight-loss products, which have now been banned by the US Food and Drug Administration, than the natural or direct sales channels.

Nevertheless, despite the appearance of a downward trend in the FDM channel, again chosen here due to the availability of better statistical data, the aggregated sales for all market channels as compiled by NBJ strongly suggests that the market for herbs and plant-based dietary supplements in the United States appears to have stabilized in traditional single-category herbs, while offering significant recent growth in condition-specific blends (still mostly weight-loss) and certain new categories like liquid botanicals including noni (Morinda citrifolia L., Rubiaceae), mangosteen (Garcinia mangostana L., Clusiaceae), and goji/wolfberry (Lyceum spp., Solanaceae) juices. Many creative and innovative companies are producing and marketing new ingredients and products that contain patented ingredients and/or those with clinical substantiation of safety and efficacy. Despite downward price pressures resulting from the importation of low-cost botanical ingredients and extracts from Asia, particularly China, the development of proprietary patented and clinically-tested ingredients and products promises to help provide the American consumer with an array of high-quality, safe, and clinically effective herbal products.

References

1. Ferrier GKL, Thwaites LA, et al. US Consumer Herbal & Herbal Botanical Supplement Sales. Nutrition Business Journal. 2006. In Press.

2. FDM Market Sales Data for Herbal Supplements, 52 weeks ending January 1, 2006. Chicago, IL: Information Resources Inc.

3. SPINSscan Natural and SPINSscan Conventional, 52 Weeks Ending 12/31/05 vs. 52 Weeks Ending 1/1/06.