March 29, 2011- Nutritional supplements are the second-largest industry in the Beehive State, up from third last year, says Tami Goetz, state science advisor.
"It's a viable, credible industry with critical mass that contributes to the economy," she says.
In 2009, the Economic Development Corporation of Utah reported more than 150 nutritional product companies in Utah, with total revenuesranging from $2.5 billion to $4 billion a year. Utah contributes about 25 percent of the nations market, according to state statistics.
While growth rates in the dietary supplement industry are down from 20 percent to 30 percent seen in the 1980s and 1990s, they're stillaveraging about 8 percent, says Loren Israelson, executive director of United Natural Products Alliance.
Historically, natural products have done well when consumers have less money to spend, Israelson says. "In a rough economy with high joblessness and high loss of insurance, what do people naturally do?" he asks. "They return to the fundamentals. They have to stay healthy and well. If they don't, there's no safety net. Our industry is part of the safety net, with people rethinking or readopting practices thatgo back to the 1820s in the United States.
"Workers are interested in having a healthy immune system and beingable to stay on the job, he points out. "What we try to do is help people stay well. People are willing to spend out of pocket, even withfew dollars in the pocket, when they believe--and experience has shown--that that investment preserves any job that they've got, keeps the kids healthy and well, and helps aging parents to feel better."
A GROWTH MARKET
Within Utah's natural products industry, the multi-level marketingsector is particularly strong, growing 10 to 20 percent, Israelson says.
One example of a natural products MLM company that's going strong is Nu Skin, which in November announced record third-quarter results,with revenue of $383.6 million, a 15 percent increase over the prioryear. A week after the financial report, the company unveiled architectural renderings for a new $80 million building in Provo.
Like Israelson, Mark R. Bartlett, vice president of Nu Skin's Pharmanex Global Research & Development, believes that health and beauty are important to people even in a down economy. "Nu Skin has made a conscious decision to continue investing in our strategy of cutting-edge innovation, and we've kept our focus on healthy aging," he says. "From my perspective, it's Nu Skin's targeted innovation that's driving our record-breaking success.
"The company has focused on its ageLOC product line, which was introduced in 2009; in 2010 it released its first ageLOC nutritional product.
In addition, Nu Skin's direct-selling business model offers people control over their own financial destinies, which individuals want in a tough economy, Bartlett says.
NEW RESEARCH--AND SCRUTINY
Forty years ago, Utah's natural products industry started with four companies. It's now grown to 155, some of which are publicly traded, many of which are international. That maturation is leading to an increased emphasis on research and development, Israelson says.
"I think the future trends will be the increasing professionalization on every level," he says. "It will begin to look like the marriage of traditional natural philosophy, health and wellness, with the best that science and technology has to bring.
"One reason for the increased R&D is the intense scrutiny that federal regulation has brought to the industry; in 2007 the FDA issued Good Manufacturing Practices for the dietary supplement industry, and it also reviews the scientific claims made by the industry's marketers.
"As regulation was introduced into the industry, we knew we had tomake an investment in a facility that would meet the needs of our customers and provide an avenue for future growth," says Mike Beardall,president of Cornerstone Research & Development, which formulates, manufactures and packages dietary supplement products. Cornerstone has a new 190,000-square-foot manufacturing and packaging facility in Ogden.
"The decision to expand was made years ago with a management team that knew what needed to be done for our industry and a shareholder who was willing to make an investment when others were not," Beardall adds. "Many years ago, Cornerstone partnered with some of the best dietary supplement companies in the industry. Their brands are recognized throughout the world for high quality and dietary ingredients thatare backed by science and research data. Our customers want to have their products manufactured in a facility with processes and procedures that are consistent with the quality level of their brand.
"While the investment in R&D might make some investors balk, it's the reason for the success of startup VMI Nutrition, a privately ownedcontract manufacturer of nutraceuticals that specializes in formulation, blending, packaging and testing.
"The most significant driver of our current and future growth has been our [$1 million] investment in a full-scale analytical and micobiological laboratory," says Bruce Redmond, co-owner/managing partner."We now have the capabilities to perform a range of testing servicesfor our supply partners, brand clients, as well as third parties--ata very competitive rate."
INVESTING IN THE FUTURE
Good manufacturing practice and training of personnel will be essential for the industry's future, not only because of the regulation but because quality ensures customer loyalty, Israelson believes. His organization is working with the state and educational institutions to develop a site that will offer not only standardized training that will be consistent with federal regulation, but also the technology that's used to test and produce products.
"We would like to formalize this now, both in terms of where this is done and the curriculum," he says. "We also would like to share the curriculum with other organizations that have a world-leading reputation and skill sets that match our own.
"This also could lead to a "Silicon Valley model tech-transfer approach," he says. "Our larger companies now are very interested in great ideas, and as a company matures, there seems to be an inverse relationship between revenues ... and really great ideas that come out within the company. So large companies are always on the hunt for great ideas that are outside their box."
Meanwhile, he hopes that the next year will bring to Utah a location where the very expensive testing and production equipment for nutraceuticals can be demonstrated for buyers as well as used for training. This could help serve the pharmaceutical and food industries, he says, and create a hub unlike any other.
Redmond sees a lot of opportunity for manufacturers like VMI that meet FDA regulations through good manufacturing practices and testing. "Consumers are embracing good nutrition solutions to improve their health and are increasingly loyal to brands that produce quality products at an affordable price" he says. "Therefore, I see continued steady growth in the industry and expect a significant amount of growth for VMI in the coming years. We have invested a lot of money expanding our facility, improving our information systems, hiring and training employees to poise the company for the growth that is being generated by 'doing things right."'
|
|
|