This 3-part series explores the wonderful world of nutraceuticals. The information included in this series was distilled from a number key references found at the end of each blog.
Marenon Consulting is presently providing consulting services to a European nutraceutical client expanding its presence in North America and the Middle East. Marenon’s client offers a diverse product portfolio as well as private-label contract manufacturing services.
by Myron Pyzyk, BSc, MS
PART 2 of 3
This is part 2 of a 3 part series exploring the nutraceutical industry and market. The focus is primarily on the markets of the United States and Canada including what to expect as challenges in each respective market. A brief overview is provided of the markets in Mexico as well as the Caribbean region.
SECTION B. DEVELOPING A SUCCESSFUL DISTRIBUTION PLAN
General Overview
The United States is estimated to account for over 32% share of the nutraceutical sales in 2007 The US is the leading dietary supplements market with sales estimated at US$21 billion for 2007. Initial apprehensions regarding the recession making huge dents into the nutraceutical industry proved false as customers traded down from their regular diet towards nutraceuticals to boost their immune systems to restrict medical expenditure.
Though the overall nutraceutical market has been able to stave off any major recessional effect, the growth rate slightly tapered down as not all segments could cope with the recession in similar manner. The majority of nutraceutical products that experienced a squeeze in sales during 2008 and 2009 were priced on the higher side. Any proposed Distribution Plan for the North America is based on discussions by Marenon Consulting with nutraceutical manufacturers and Distributors.
The type of target market optimal for entry into the U.S. nutraceutical market for nutraceutical products should satisfy the following criteria:
a) Distributor should have wide reach i.e. provide national coverage to maximize market penetration within the first year after products are launched in the U.S.
b) Distributor should provide product to retailers who have access to a large ethnic client base who, in all probability, are familiar.with usage of nutraceuticals and phytotherapy to improve or maintain their health.
c) Nutraceutical products will need to be translated into one or more local languages including product packaging and labelling, dosing instructions and promotional material.
d) Regulatory approval and licensing will be required for nutraceutical products in most markets. This can be highly regulated such as in Canada where the file must be handled similar to a registration file for pharmaceutical or medical device products or less regulated as in the United States to almost no regulations except for satisfying appropriate customs and duty requirements such as in Mexico. Therefore, each market will need to be approached on a case-by-case basis including the regulatory expectations and requirements including what this means in terms of resources and impact on the time to eventual product launch.
- United States of America
Marenon Consulting offers the following recommendations regarding Distributors:
a) Major Distributors This includes those Distributors who already have an established nationwide franchise or company-owned specialty health stores. Please contact Marenon Consulting to discuss in more detail.
b) Other Distributors (USA) Drug stores or pharmacy chains as well as supermarket grocery stores sell nutraceutical products. Please contact Marenon Consulting to discuss in more detail.
2. CANADA
As U.S. economy growth is expected to offer subpar expansion in 2011 and 2012, many U.S. dietary or health supplement companies have started to expand their businesses into foreign markets. Canada appears to have become a hot target. Nutrition and supplement use is an everyday part of Canadian lives as currently, 71 percent of Canadian adults report they have used a natural health product, and 38 percent report they use at least one on a daily basis. With a population roughly one-tenth the size of the United States, setting foot into the Canadian marketplace could result in a company possibly achieving 10-percent or more in sales growth.
The Canadian supplement industry at retail level exceeded $2.75 billion in value by the end of 2010. Canadian consumers are becoming more aware of the stringent regulatory requirements in Canada and as a result, their confidence in these products continues to grow and sales will only continue to increase. The Canada’s regulatory model is being recognized by the international community and products licensed by Health Canada are being looked upon favourably by markets abroad. Many American companies have recognized this opportunity and have begun to take charge of the Canadian marketplace. Entering the Canadian market, however, is not easy. Canada requires products to be licensed prior to market entry by the Natural Health Products Directorate (NHPD), a branch of Health Canada. In 2004, Health Canada established the Natural Health Products Regulations and the NHPD to address these concerns. When the regulations came into place in 2004, the NHPD received an influx of tens of thousands of applications and has not been able to clear this queue of applications since. As a result, enforcement has been minimal and only high-risk products have been targeted. Examples of products considered to be high risk include those intended for children or pregnant women.
Since 2004, the NHPD has completed its review of over 33,000 of the 43,000 applications submitted which has resulted in 48 percent of the reviewed applications either being withdrawn or refused. Although it is a legal requirement to have a product license to sell a supplement in Canada, the NHPD has minimized enforcement measures on products being sold with a submission number. A submission number is a number issued by the NHPD several weeks after a Product License Application has been submitted for review that acknowledges a complete application has been received and placed in queue. New enforcement measures will absolutely require a product to have a license before entering the marketplace. For U.S. companies importing products into Canada, the situation is different. The American-Canadian border is an easy place to employ enforcement measures. Every shipment of product entering the country can be inspected to ensure compliance via Customs Agents. Without a submission number, products are turned away. NHPs (dietary supplements) must be manufactured, packaged, labeled and imported in accordance with the NHP GMP. Any domestic company involved in any of these activities must apply for and be issued a Site License by the NHPD and U.S. companies’ products must be brought into the country by a domestic importer that holds a valid Site License to import supplements. It is therefore important for any company that is considering expansion into Canada to take special care in ensuring each of their products has a thorough application in queue with the NHPD. Presently, retailers are definitely developing a strong preference for licensed products as licensed products represent less risk compared to non-licensed ones. The Order of Pharmacists of Quebec and the National Association of Pharmacy Regulatory Authorities have recommended to all pharmacies across Canada not to sell supplements without a product license.
Recommendations for Canadian Distribution
Realize that the Canadian regulatory environment radically differs from that found in the United states and therefore, any product strategy and operations plan must ensure sufficient time and resources to ensure a successful product launch. Marenon Consultng will work with your company to ensure that the appropriate stakeholders are identified and effectively managed to ensure your company’s success.
3. Other North American Markets
- Mexico
Access to prescription drug and nutraceuticals are similar to other markets such as those in South America.
- Caribbean Region
Each market should be assessed on both a regional as well as on a per-country basis. Marenon Consulting is currently assessing several potential partners for nutraceutical distribution in the Caribbean region.
For more information on this topic, please contact:
Marenon Consulting +1 416 571 8504 or info@marenon.com
About the author
Myron Pyzyk is the Principal Consultant and CEO of Marenon Consulting with over 20 years of experience in the pharmaceutical & biotech industries.
REFERENCES
1) Overview of the Nutritional Supplements Market, December 26, 2007
2) Global Market Growth for Dietary Supplements, April 17, 2008 Peter Zambetti
3) List of Events – Nutraceutical World, April 10, 2011-07-29 http://www.nutraceuticalsworld.com/
4) Supply Side East Expert Report 2011
5) Health Canada – Natural Health Products
6) FDA Overview Dietary Supplements
7) Federal Regulation of Dietary Supplements: Eight Years After the Enactment of DSHEA, Where are We? Fred H. Degnan, Esq.* ANA Outside General Counsel, King & Spalding, Washington, DC
8) Dietary Supplements Case Studies in Claims Substantiation, April 6, 2011 by Steven M. Weisman, Ph.D.
9) The Canadian Marketplace and Regulations for Dietary Supplements, January 18, 2010 by Peter Wojewnik
10) Canada’s new Food Guide includes dietary supplements By Clarisse Douaud, 12-Feb-2007
11) Ahmad, M.F., S.A. Ashraf, F.A. Ahmad, J.A. Ansari and M.R.A. Siddiquee, 2011. Nutraceutical market and its regulation. Am. J. Food Technol., 6: 342-347. URL: http://scialert.net/abstract/?doi=ajft.2011.342.347
Very good article.
nutraceutical manufacturers