Over-the-Counter
                                                  Nutritional
                                                  Supplements:
                                                  U.S. Market
                                                  Trends and Key
                                                  Players
                                                  Eric Minkwitz
                                                  Decision Resources, Inc.
                                                  Published by
                                                  Decision Resources, Inc.
                                                  July 1999
                                                                                          Over-the-Counter Nutritional Supplements
                         Contents
                         1.  Business Implications .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 1
                         2.  Introduction: Nutritional Supplements Grow in Popularity .  .  .  .  .  .  .  .  .  .  .  .  .  . 2
                         3.  What Are Nutritional Supplements?.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 4
                                  The National Institutes of Health Definition .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 4
                                  Dietary Supplement Health and Education Act Definition.  .  .  .  .  .  .  .  .  .  .  .  . 5
                         4.  Nutritional Supplement Sales .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 5
                         5.  Market Characteristics.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 8
                                  Factors Driving the Nutritional Supplement Boom.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 8
                                      Favorable Demographics .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 14
                                      Positive Publicity About Supplements and Increased Consumer Interest .  . 14
                                      The Growing Influence of HMOs .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 15
                                      Increased Funding for Vigorous Scientific Research .  .  .  .  .  .  .  .  .  .  .  .  . 16
                                      Advantageous Regulatory Environment .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 17
                                      Wider Distribution of Products.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 18
                                      A Trend Toward Healthier Habits .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 19
                                  Supplement Categories and Target Markets.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 19
                                      General Population .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 23
                                      Men .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 23
                                      Women.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 24
                                      People Older than Age 50 .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 24
                                      Athletes and Fitness Enthusiasts .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 24
                                      Indication-Specific Groups .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 25
                                  Near-Term Product Development Trends .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 25
                                  Supply-and-Demand and Crossover Phenomena .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 26
                                  Growth Prospects by Supplement Type .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 27
                                  Corporate Strategies.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 30
                         6.  Pharmaceutical and Chemical Company Involvement .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 31
                         7.  Regulatory Environment .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 35
                         8.  Industry Structure .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 37
                                  Manufacturers of Fine Ingredients/Raw Materials .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 37
                                      Strategies for Success .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 38
                                                                            ii
                                                                                                                                         Over-the-Counter Nutritional Supplements
                                                          Challenges .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 39
                                                          Leading Companies.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 40
                                                                Ashland Chemical .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 40
                                                                Bio-Botanica             .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  42
                                                                Botanicals International .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 44
                                                                Hauser .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 45
                                                                M.W. International .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 46
                                                                Pfanstiehl Laboratories .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 48
                                                                Quality Botanical Ingredients .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 49
                                                    Supplement Product Formulators and Marketers .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 50
                                                          Strategies for Success .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 50
                                                          Challenges .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 52
                                                          Leading Companies.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 53
                                                                American Home Products .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 53
                                                                General Nutrition Companies .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 56
                                                                Leiner Health Products.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 57
                                                                Natrol .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 59
                                                                Natural Alternatives International .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 60
                                                                NBTY.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 61
                                                                Pharmavite.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 64
                                                                Rexall Sundown .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 65
                                                                TwinLab .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 67
                                                                Weider Nutrition International.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 69
                                                    Retailers and Wholesalers.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 71
                                                    Keywords: Alternative therapies, Chemical industry, Ginkgo, Herbal medicines, Herbal
                                                    remedies, Kava kava, Nutraceuticals, Nutritional supplements, Over-the-counter dietary
                                                    supplements, Pharmaceutical industry, Phytotherapy, R&D, Regulations, St. John’s wort,
                                                    Strategic planning
                                                    Companies: American Home Products, Ashland Chemical, Bio-Botanica, Botanicals
                                                    International, General Nutrition Companies, Hauser, Leiner Health Products, M.W.
                                                    International, Natrol, Natural Alternatives International, NBTY, Pfanstiehl Laboratories,
                                                    Pharmavite, Quality Botanical Ingredients, Rexall Sundown, TwinLab, Weider Nutrition
                                                    International
                                                                                                                    iii
                                                                                  Over-the-Counter Nutritional Supplements
                       Tables
                       Table 1.   Phytotherapy or Herbalism Products (per NIH definition).  .  .  .  .  .  .  .  .  .  .  . 6
                       Table 2.   Orthomolecular Medicine Products (per NIH definition) .  .  .  .  .  .  .  .  .  .  .  . 7
                       Table 3.   Top 50 Nutritional Supplements in the U.S. Market, Their Purported
                                  Health Benefits, and Their 1998 Sales .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 9
                       Table 4.   Target Groups/Conditions for Selected Supplements.  .  .  .  .  .  .  .  .  .  .  .  .  . 20
                       Table 5.   Promising New Supplements for the U.S. Market .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 28
                       Table 6.   Selected Acquisitions, Partnerships, and New Business Units Among
                                  Pharmaceutical and Supplement Companies .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 33
                       Table 7.   Leading U.S. Suppliers of Botanical Raw Materials .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 41
                       Table 8.   Leading U.S. Supplement Manufacturers and Marketers .  .  .  .  .  .  .  .  .  .  .  . 54
                       Table 9.   U.S. Channels of Supplement Distribution.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 72
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