Who Really Controls the Sales of Vitamins and Dietary Supplements Among the Top 50 Companies?

As health and wellness trends capture the interest of consumers in healthy living, the idea of health and disease prevention via the consumption of vitamins and dietary supplements (VDS) may be a bit deceiving in terms of what types of companies really control the sales of such products.  During the review of consumer mass media articles and natural living publications it is not uncommon to find praise for vitamins and dietary supplements sold by nutritional companies, while demonizing pharmaceutical and other powerful consumer goods corporations. Ironically, VDS consumption has shown a strong connection with the pharmaceutical industry since its beginnings, and explains the reason why pharmaceutical companies dominated 36% of VDS retail value in 2012, up three percentage points from 2007 among the top 50 VDS companies and private label comprising 44% of global sales.

The Competitive Landscape in VDS

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Source: Euromonitor International

Note:  Retail Value RSP 2012 – US$

Multivitamins, single vitamins, calcium and mineral supplements, probiotics and some fish oils have been sold by pharmaceutical companies for decades. These options used to be prescribed or recommended to people by general practitioners who diagnosed nutritional deficiencies in people. As pharmaceutical companies shifted their focus on research and development of prescription drugs and biotechnology, regulatory agencies flexed their oversight on VDS and nutritional companies cleverly captured this opportunity to manufacture, market and sell products meeting the emerging consumer demand for healthy living options. A less stringent regulatory framework, low-cost manufacturing and high margins caused a financial boom for hundreds, if not thousands of small nutritional companies. Over the years, some of them became large and successful enough to grab the attention of large pharmaceutical and consumer good companies as potential acquisition targets.  Consequently, nutritional companies are losing ground by dropping two percentage points in share in 2012 when compared to 2007 figures.

At present, regulatory agencies are assessing and reviewing the regulatory framework for VDS in many countries. This trend is mostly perceived as the formalization of VDS where companies with products backed with science-based and confirmed claims will secure the best prospects to remain in the market. Successful nutritional companies have paved the way for major pharmaceutical and consumer goods companies seeking to invest and market novel VDS via quick acquisitions. Nutritional companies can be attractive since their brands, innovation, a loyal consumer base, and attractive revenue may secure future growth for bigger enterprises. In this scenario, Pfizer Inc acquired Ferrosan AS in Europe and Alacer Corp in the US, while Reckitt Benckiser snapped up Schiff Nutritional International Inc in the US.  Alternatively, nutritional companies are also under the radar of other major consumer goods companies. Procter & Gamble, Reckitt Benckiser, Church & Dwight and L’Oreal Groupe are raising their stake in VDS as an organic growth strategy in a bid to test the waters of the emerging trend of “consumerism” of VDS.

Direct sellers held 22% retail value share amid robust growth in the emerging regions of Asia Pacific, Latin America and Eastern Europe, where direct sales have become a complementary source of income for millions of people. However, the big surprise is actually coming from private label as it jumped four percentage points from 2007 to achieve 15% retail value share among the top 50 players in 2012. Private label sales concentrated in North America (78%) and Western Europe (15%) in 2012. The recent strategy of retailers centres in the re-launch of private label and premium options under names such as Simply Right (Wal-Mart Inc), TruNature (Costco Wholesale Corp), Finest Nutrition (Walgreen Co) and Vitality (The Boots Company Plc) with attractive packaging resembling standard brands. Consumers are having a harder time differentiating standard brands from private label at the point of sales.

Moving forward, pharmaceutical and consumer goods companies are anticipated to expand their investment in VDS even further via local and regional acquisitions of successful nutritional companies. Their strategy will probably follow the trend of keeping the original name of the acquired company in the packaging or labelling so it becomes more difficult for consumers to tell the ultimate owner of a VDS brand amid the anti-corporate and anti-pharma sentiment. Just like it happens in the case of packaged foods and beverages companies, where some organic and functional brands skip the names of their big multinational corporate owners.

Note:  Analysis of medical and enhanced nutritional products by companies such as Nestlé SA, Danone and Abbott Laboratories are excluded from this analysis as these types of products are not tracked in the Consumer Health system.