May 2022 Industry Highlights

Natalia: 00:05

Hello and welcome to the Vitafoods Insights May Industry Highlights. I’m Natalia Franca Rocha, content & conference manager at Vitafoods. Today we’re showcasing some of the key highlights across Vitafoods and the nutraceutical industry, offering a little context on how it might accelerate your product ideation and go to market strategy. Earlier this month, we hosted our Vitafoods Europe 2022 hybrid event, where we covered lots of different topics including digestive health, healthy ageing, sports nutrition, mental wellbeing and cognitive health, women in nutra, regulatory considerations, market trends, sustainability, among others, a few of which we will now deep dive into. We will also be sharing some presentations on our Vitafoods Youtube Channel, so keep an eye out for these if of interest. First…With so many changes happening due to COVID, it’s important to be aware of the market as a whole, and as a business, know where to aim your strategy at the sectors of growth with the greatest potential, as Eric Pierce, VP of Business Insights at Informa Markets & Nutrition Business Journal highlighted at Vitafoods Europe:

Eric: 01:15

The majority of the marketplace is dominated by a handful of markets and larger regions, the United States and China together, representing nearly 50% of all global sales, followed by Western Europe, India playing a major role, Latin America and Japan being in a large market. Then if we begin to think about population size in relation to supplement sales, we might think differently about where opportunity exists in the market. If we look at supplement sales per capita, suddenly the really large markets look a little bit differently, right? If we think of the United States as one of the more attractive markets for the dietary supplement industry, one could ask how do I find more markets that look like the US, right? And I think looking at sales per capita is one way to begin to do that. Of course, you can look at China and see 1.4 billion potential customers, and $25 billion in sales and say that's really attractive. But on a per capita basis, that's only $9 of supplements sales per individual in that market. In comparison to a much smaller market, people might look to Australia and New Zealand as a combined market and say that's not as attractive as these massive markets with billions of customers, only 3.1 million consumers, but a per capita supplement sales of $106 per consumer, maybe that is something worth considering. We continue to see a lot of innovation outside of traditional pills and capsules, in chocolates and fast melts, and of course, gummies as as well. And so, lots of opportunity to engage consumers with different delivery formats in the market broadly, we're seeing benefits over condition emerge as a disruptive way of engaging consumers. This is almost an emotional play where rather than talking about a health condition, many brands are beginning to talk about delivering peace or joy or happiness, more emotional communication with consumers promising an end benefit that isn't necessarily health outcome. Of course, I have to talk about immunity that's been a hot area of innovation. Immunity has really made a major transition over the last few years of being a seasonal ingredient or a seasonal sort of product claim that someone takes when they're feeling unwell or afraid they might get sick to boost their immunity to an everyday positioning. And then it's also transition from an everyday positioning into a supporting benefit. And then we've got easing stress with botanicals in the US especially this has been a hot area of innovation where stress, especially for younger consumers seem to be one of the strongest health concerns that people are managing.

Natalia: 03:43

With so many innovations taking place in products developments and formats, immunity takes priority as a supportive everyday requirement to support sleep and consumers’ holistic health. Stress is also a key trend affecting many consumers, especially the younger generation, leading brands to involve consumers more and directly communicate with them with emotion communication strategies over health claims. May is also the Mental health awareness month, and indeed mental wellbeing in today’s age is of top priority, especially in today’s digital age as highlighted by Isabella Davis, Senior Project Manager & Research Associate at Nutrition Business Advisors:

Isabella: 04:25

You'll find that Gen Z reports worse mental health than millennials. A lot of people say, well, they're more open minded and there's less stigmatisation around depression and anxiety and other mental health issues. And that is true, but they also have some physical reasons to be experiencing more mood issues. 98% of them own a smartphone. I couldn't find a stat on this, but they've really grown up with technology and had an iPhone or an iPad, ever since they can remember. So their life sort of revolves around these devices, and the first generation to have that. And so take a pause to reflect on how that might impact their brain. In 2014, the average adult screen time was four hours. And now this is a stat from 2021, it's average 8.5 hours of screen time per day. And that's for adults. I think, for me, it's probably more like 12 hours a day. If I consider texting, entertainment, and work, it feels almost like my entire waking day is spent looking at a screen in some form or the other. And the first problem that arises with interacting with our electronic devices is that social media and even email can constitute a neural addiction. So there's a dopamine response when we look at our devices. And we know this to be true, because you'll find yourself grabbing your phone and scrolling, when you didn't even want to be doing that. And it's distracting you and pulling you away from the things that you want to be doing.

Natalia: 06:12

Going through life, facing so much uncertainty following COVID, getting distracted by all the technology and social media, experiencing anxiety and depression is being referred to across many different industries as the next pandemic. Jennifer Cooper, President of Alternative Laboratories shares more on the data behind this global burden of major depression and anxiety disorders:

Jennifer: 06:35

It's not our imagination, that the burden on individuals and families, and globally, on society is increasing. So, we estimate that during this timeframe, we've added 50 million cases, to major depressive disorder, and almost 80 million cases of anxiety and depression. It brings us to this idea of can we cure mental illness? It's not really a disease that we think of as curative. The psychotropic drugs have certainly offered a tremendous amount of benefit to millions of individuals, when looking at specific symptoms, or a very small sub segment of its aetiology. But mental health challenges are among the most poorly diagnosed. In addition to that, they are the efficacy of those drugs is incredibly low, the side effects are very high. And to exacerbate all of that, the compliance of patients taking these drugs is very low. The situation which is mental health experts are describing as a crisis really needs a revolution in terms of how we look at and manage mental health. And what would a mental health revolution look like? Well, for sure, because the aetiology of these diseases is so complex, and that it's not just one mitigating factor, for sure, we would benefit from a more holistic approach. There's a lot to be said for preventive medicine in this area, complementary medicine and adjunctive therapies, something that's accessible, something that's affordable, something safe. And since this is something that is a challenge throughout the entire lifespan, something that's appropriate throughout our lifespan.

Natalia: 08:40

Consumers are constantly facing different struggles, whether that’s at work, school, or at home, and as Jennifer mentioned, these challenges are faced throughout consumers’ entire lifespan. And consumers are now also much more aware of their overall wellbeing, so brands are being pushed into understanding their consumers into a deeper level so that they can provide them with the optimal solutions they seek. And that brings the question of what does happiness means to consumers? Martin Oxley from Buzzback shared insights on their study about understanding happiness among consumers:

Martin: 09:14

We studied 400 people in each of the markets here UK, Brazil, US and China to try and see if there was a global commonality really, is happiness, the same everywhere? Are there similarities, differences? And then also we looked across different age cohorts. You know, what does happiness mean to you? You know, people commonly derive happiness from spending time from others, eating and drinking as a source of happiness often, as you know, with others, culture, success, but also particularly in the UK and the US, which are more individualistic societies than collectivist societies, spending time alone away from others can also be a source of happiness. We talk about social media having of lowest scores in terms of driving happiness. But notice that no one really, to any great extent mentioned health. And I guess you're probably wondering that, and that's because it's linked more with unhappiness.

Natalia: 10:15

So, what can brands do to increase consumers level of happiness?

Martin: 10:20

Every penny counts really. And this idea of value for money, you can improve my feeling of happiness by making it cheaper. But then there are more involved elements like sustainability, particularly in China or Brazil, this was popping and we all know there is a say do gap. But equally, if you can link to purpose, this can be very key.

Natalia: 10:41

Of course it’s also important for brand owners to consider market access and compliance of wellbeing and mental health nutraceuticals, a topic Nicolas Carbonnelle, who’s partner at Bird & Bird speaks more of:

Nicolas: 10:55

Supplementation for health and wellbeing purposes is in fact, an emerging segment from a regulatory perspective. And for that reason, it faces a number of particular challenges that need to be considered when developing a new product or preparing the launch of such products. Well, first of all, ingredient suitability. In fact, you need to verify that all ingredients you want to put in your product will be suitable for use, admitted to be used in in nutraceuticals in the EU, and of course, in the national markets where the product is intended to be placed. Second point you need to look at, product qualification. We are talking about nutraceuticals, and we often say nutraceuticals for food supplements, while in fact the category is slightly broader, legally speaking, nutraceutical is not defined, but we are talking about food supplements, we are talking about fortified foods in the regulatory framework. We are also talking about other categories that are really at the border with fortified foods and food supplements. In certain cases, you have cosmetics, but you also have medicinal products, which are completely subject to other rules. And in particular, in relation to well being and mental health nutraceuticals, you can really easily step into the limits of where you can be with a product that will still qualify as a fruit. And that's something you need to be aware of and be careful about when you position your product in terms of labelling and commercial communication more generally. Market access requirements will vary in function of the category your product belongs to. But in fact, one of the most pressing challenges that applies to nutraceuticals in the context of mental health and well being is in fact claims. The use of claims is highly regulated in the EU. And in a nutshell, the system is based on a positive list, which means that only claims that are authorised previously, can be used to communicate about the product or an ingredient. The compotent authorities in that case of the Commission helped by EFSA. And the difficulty is that not so many claims are relevant to the mental health and wellness space are currently authorized.

Natalia: 13:10

Next.. sustainability is also a booming space within the nutraceutical industry. In fact, they’re a must-have component of company’s strategies being demanded by consumers. Sustainability initiatives have changed in the past years. Steve French, Chief Operating Officer at the Natural Marketing Institute highlights sustainable practices bring brand owners with higher return of investment:

Steve: 13:34

Almost half of US consumers are more concerned about protecting the environment, almost half are more committed to living a sustainable lifestyle. And something that's really interesting is consumers feel a bit more in control. And that's a very important thing in today's world. And they've also become more concerned than ever about what a company is doing to lessen the impact on the environment. Furthermore, nearly six in 10 are making their decisions with the effect they will have on health and sustainability. That's up from 45% in 2017. So again, we continue to see positive trends surrounding the world of sustainability.

Natalia: 14:23

Indeed, Sustainability efforts, sense of purposes and trends is driving the market. Joao Brites, Director of Growth & Innovation at HowGood emphasises these points:

Joao: 14:34

Sustainability claims are driving sales to just simply manage risk. But what we're seeing more and more is that sustainability claims are not just driving consumer awareness about sustainability, but they're actually changing consumer behaviour. We're seeing shoppers are becoming increasingly empowered with information on the social and environmental impact of their food purchases. We're seeing regulators harmonising labelling and reporting frameworks, grocers testing sustainability rating systems and sustainability claims are under much deeper scrutiny than ever before. Carbon is a new calorie, we're seeing food companies becoming increasingly committed to reducing greenhouse gas emissions across not only their own operations and subsidiaries, but also through your supply system with many companies already committing to net zero emissions.

Natalia: 15:31

Focusing more on the social aspect of Sustainability, gender equality remains an important topic in the nutraceutical industry, which my colleague Heather Granato expands more on:

Heather: 15:43

We had a dialogue about this last October and then talked about it in Las Vegas. And then a number of these amazing women who are going to be joining our dialogue and several in the audience said, we really need to talk about this more, but get really active and make this tangible. So, excited about the official launch of Women in Nutraceuticals, a new organisation serving our industry for the nutraceutical market. Yay, we filed our paperwork and everything, we're legit.

Natalia: 16:13

You can find more information about the Women in Nutraceuticals organisation on the shownotes, but let’s hear directly from the powerhouse panellists who joined the WIN panel discussion at Vitafoods: Asma Ishaq, CEO at Modere; Julia Wiebe, Managing Director at RED OTC; Inger Aukrust, Co-founder and VP of R&D and Chemistry at Kappa Bioscience; and Sybille Buchwald-Werner, Co-founder and managing director at Vital Solutions.

Asma: 16:45

We took a lot of pride about our industry being very progressive, in a sense, because we're natural products and we effected change in 1994. And try to change from a policy standpoint, but it doesn't show when it comes to women in these businesses. And so, I think it's because maybe we as an industry believe we are virtuous already, by participating in things like alternative medicine or natural ingredients, or the fight against GMO. You know, there's so many great causes that we have in our industry, right? That's why we're all here. We believe passionately in our blood about what we do. And there's no other industry that I'd rather be in ever, you know, but at the same time, maybe that's pride, like really blinds us to the fact that we have some work to do, you know, to really kind of become a progressive industry in a way that we really want to

Julia: 17:37

It comes from the top. So, I think it's very important to identify in the company, where the problem actually comes from, why don't we have a more balanced situation? And once we identify that in the process of finding talent, but also maintaining talent, and giving women the possibility to work in a bit more flexible way, we can also make sure that they stay on, because what I read, what I thought was really interesting, a huge percentage of women thinks that they have to change industry to actually move on and grow, while men don't have this perception. And this goes back to the to all the crystal we have around us.

Inger: 18:23

So young women should actively seek out mentors as early as they can. I think that's, that's really important.

Sybille: 18:32

Don't look only at young women, look also at elderly women. Because if the kids are away from school and they have more time and they want to come back, maybe they will start a completely different career. But consider that they, even if they start this 45 And they need five years to come back and find what they want to do, they still have 20 years to work, and we need this.

Natalia: 18:57

When looking at the financing challenges for women-owned business, we had a panel discussion Vitafoods developed alongside Nutrition Capital Network chaired by Mike Dovbish. We had some great tips and advice for women seeking investment in the industry, so let’s hear directly from the panellists: Jan Mills, CEO of Artemis International; Dean Mosca CEO of Things of That Nature; Lorna Vanderhaeghe, VP of Marketing and Innovation at Things of That Nature; and Thomas Hafner, Founder and Chairman of Zaluvida Ventures.

Jan: 19:34

When you think about venture capital and getting investment, most of us know that we're going to jump on some kind of a treadmill. And it's going to be fast and hard. And the whole thing is to grow and to get bigger and to do it the next venture. But that may not be what we want. And that's why I said I wanted to address women who are starting businesses now. I want you to stop and think if you take venture money and you may need to because we all know there's a point where we all gotta figure out how to pay the bills, right? But if you can avoid doing that, at least for eight time, you may well be better off, and you may be a little bit happier and have the kind of business you want. So most of us, we start businesses, we're passionate about something, we want something to happen. We're type A, we're gambling, we know it. We're going crazy. And we think we need to raise money. But if you just stop for a minute and think, why did I start this business?

Dean: 20:19

So, getting financing doesn't just mean going on and asking people to invest money and giving up equity. Supply and the whole trade financing is another issue that way too often overlooked, not only going to suppliers and telling, here's what I'm doing, here's what I'm working on, can I get 60 days, can I get 90 days, whatever the case, may be, I do 30 On this 60 and then 90, also your customers, you say a 2% discount, which is expensive money when you analyse it, but 2% on, you know, on a 40% margin, and you bring in 200 grand today versus having to go to bank and get 200 grand for 30, 60, 90 days. That's the kind of financing that you really need because it's the, it's the month to month, day to day operation, paying payroll and, and paying your suppliers and waiting for money from customers. That's where the bulk of the money is really needed. And so there's a big opportunity there that often people don't even know about, they just don't even think about.

Lorna: 21:09

I think that you've got to find a financial partner that is going to love what you're doing as much as you do. And that's going to be there to support you. Because I truly think that's the key. And I think the mentoring is so important. And I had an amazing mentor. Her name was Clare Flare. And she built a business in a market, an allergy free market, she was the first person so she was an amazing woman who I could call at any time of the day, who was there to support me, who told me all of her failures, and not to do them. Your job is to listen to them and take their knowledge and grow your business the way that you want to. So I think finding a partner that is really excited about your business, who isn't just interested in the money that you're making in your business, it's going to be a lot more fun of a ride.

Thomas: 22:04

As a European, my gut feeling is as Europeans themselves are more conservative anyway, in terms of presenting their business plans and European attitude towards what in America we call performance financial plans with a hockey stick, people are going to scrutinise that, people are going to tie me down to those numbers. Whereas, you know, in North America, it's it's a tapestry of your mind how you see your business evolving. No one believes those figures are gonna come gonna come through in the time you say they're going to come true, but they want to see how your business evolves, which is a fundamental difference to how we present these kinds of things in Europe. And it is true, I as European raise money in America because they do buy into that dream they do buy much easier into those things.

Natalia: 22:46

As you can see, there was lots of learnings and a great variety of topics covered at Vitafoods Europe 2022. Looking ahead of time, our next Vitafoods Europe will take place in May 2023, so stay tuned for more information coming soon. Thanks again for joining me, and don’t forget to check the show notes that will allow you to link to the information discussed in today’s podcast. The Vitafoods Insights Industry Highlights podcast happens monthly, so be sure to stay tuned, subscribe and even suggest to a friend.