Vitamins and supplements are hotter than ever, as illustrated by PG’s recent tour of product sections in one of the United States’ physically fittest markets.
Fireworks in July are nothing new, but this year the vitamin and supplement industry elicited oohs and ahs from Wall Street to Main Street with July reports of explosive growth, a record-making deal and seemingly recession-proof retail sales.
On July 15, in one of the largest leveraged buyouts of the year, private global investor firm The Carlyle Group agreed to buy NBTY, a maker of vitamins and nutritional supplements, for $3.8 billion in cash. Formerly known as Nature’s Bounty, Ronkonkoma, N.Y.-based NBTY makes vitamins and nutritional supplements under a variety of brand names in the United States and abroad, including MET-Rx, Vitamin World, Puritan’s Pride and GNC’s British division.
One week later, Vitamin Shoppe, Inc., a North Bergen, N.J.-based specialty retailer and direct marketer of nutritional products, reported in its preliminary second-quarter results that comparable-store sales had increased 8.6 percent and net sales had grown 12.3 percent to $192 million for the three months ending June 26, 2010, marking the company’s 19th consecutive quarter of comps growth.
And sales of vitamins and supplements show no signs of cooling off anytime soon. Global market research firm Mintel says the U.S. vitamins and minerals market was worth $11.2 billion in estimated sales in 2009, a 6.2 percent increase from 2008. Chicago-based Mintel further predicts sales in this category to grow to $15.1 billion by 2014.
What’s Igniting Sales?
What are the key factors driving the vitamin/mineral category? Market analysts like Mintel point to the aging baby boomer population, for one. Older consumers — those age 55 to 64 — will increase by 13.6 percent between 2009 and 2014, and those age 65 to 74 will grow by 23.5 percent, notes the analyst firm. Historically, this demographic has consumed the most vitamins and minerals. Mintel also believes that the growing female population will have a positive impact on sales in this category, as research shows women use more vitamins and minerals than men.
The well-publicized H1N1 virus of last year’s cold and flu season made preventive health care top of mind for millions of Americans. As a result, Mintel predicts more consumers will turn to vitamins and supplements to ward off illness during subsequent cold and flu seasons. Interestingly, the recession appears to be playing a role in this preventive health care kick — in a way that’s actually boosting sales. Mintel found that recessionary fears about taking sick leave were motivating some workers to turn to vitamins and supplements to promote wellness and ensure face-time at the office.
This mindset may also spur the increasing U.S. Hispanic population to buy more vitamins and supplements, says Mintel. While research shows Hispanics currently use fewer vitamins and supplements than other groups, this demographic is poised to increase its spending power to $1.1 billion by 2010, notes the company. As Hispanics have the highest rate of being uninsured of all ethnicities, Mintel believes they could be persuaded to direct more of that buying power to vitamins/supplements as an effective way to ward off illness and save on health care costs.
Supplements and the City
Earlier this year, Gallup revealed that four of Colorado’s metro areas had made its list of the top 10 fittest cities in the country. The poll, which looked at Americans’ average body mass index and healthy eating and exercise habits, named Denver/Aurora among the most fit. Progressive Grocer wondered what the vitamin and supplement retail scene was like in one of the nation’s fittest cities, where staying healthy is a way of life. A tour of Denver metro area stores gave us a good idea. In a word: competitive.
The Denver metro area is home to a host of traditional supermarkets, including Safeway, Albertsons and King Soopers; mass merchants like Walmart and Target; club stores like Costco and Sam’s Club; and drug stores including Walgreen’s and Rite Aid; plus a slew of natural grocers such as Sunflower Farmers Markets, Sprouts Farmers Markets, Whole Foods and the Lakewood, Colo.-based Vitamin Cottage Natural Food Markets — which alone has more than a dozen stores in the metro Denver area. All of these retailers are vying for a piece of the vitamin and supplement market.
Store visits revealed a wide range of offerings and merchandising strategies. At one of Safeway’s upscale lifestyle stores in Erie, Colo., the vitamin and supplement aisle was simple and straightforward. About 21 feet of shelving housed a selection of vitamins and supplements. Attached to the shelving was a Nature Made Vitamin Book. The book, offered a do-it-yourself kind of diagnosis, featuring tabs for each reference section, from Women’s Wellness to Heart Healthy to Mood and Stress.
Hearing that Walmart and Natrol, Inc., a Chatsworth, Calif.-based manufacturer of nationally branded nutritional products, had recently teamed up to target women with a “Natrol for Women” grouping of female-friendly nutraceuticals in the vitamin section of the mega-retailer’s U.S. stores, PG made a trip to the mass merchant’s Supercenter in Lafayette, Colo. The store featured a 15-foot aisle devoted to vitamins and supplements, but no Natrol for Women installment yet. Easy-to-read signs clipped to the shelving neatly designated the department’s current offerings. This included Men’s Health, Women’s Health, Healthy Bones and Joints, Probiotics, Sleep Aids and Stress Relief, Healthy Heart, Vitamin D, Calcium, Glucosamine, Energy and Metabolism, Fish Oil, and CoQ10, the last of which also offered a definition on the sign: “an antioxidant that may help promote a healthy heart.”
At a Costco in Littleton, Colo., a host of vitamins and supplements was available in value packs and bulk sizes. Shoppers here seemed to know what they were looking for, which was good, as directional signage was limited. The customer benefit at this store: weekend sampling. As Costco does with many of its products, when PG visited it was sampling a CoQ10 product for those craving a dose of antioxidants on the spot.
Of course, natural food stores have been in the vitamin and supplement business right from the beginning, and it shows. While the vitamin departments at the traditional supermarkets, mass merchants and club stores visited were somewhat subdued in their merchandising approach, at Sprouts Farmers Market in Aurora, Colo., the vitamins and supplements section was a substantial three aisles, plus an entire adjoining wall, over which bright, colorful signage hung.
The aisles featured farmers’ market-style signs that further delineated scores of subcategories, from functional foods to herbal capsules to immune support to joint health and green foods. A variety of free and for-sale literature was also available in the aisles. A refrigerated case at the end of one aisle stored the flax oils, acidophilus and bifidus products, and probiotics. In another aisle, vitamins and supplements for the whole family were featured under signs reading “Women’s Health,” “Men’s Health” and “Children’s Health.”
The strategic merchandising and strong signage at Sprouts are working. According to the company’s vitamin/ supplement buyer and category manager, Tom Fitzgerald, “Products in the children’s health categories are still gaining traction with new probiotics, fibers and digestive aids.” Other hot products for Sprouts include vegetable proteins and combinations, along with “products in familiar categories,” according to Fitzgerald, “such as multiple vitamins and prenatal vitamins that are either USDA organic or made with organic ingredients.”
As its name would suggest, a Vitamin Cottage Natural Food Markets location in Denver featured an impressive vitamin and supplement department representing about a quarter of the entire store. Signage and literature were available throughout the department, designating a dizzying array of subcategories that included all of those from the aforementioned stores, plus additional ones like Ester C, Colon Care, Glandulars and Psyllium Husks.
What was also different here was the availability of knowledgeable and helpful staff. Two employees appeared to be working the department while PG was there, and both asked if they could be of assistance at different times during the visit. One of the employees later engaged a customer in an in-depth conversation about that shopper’s vitamin and supplement needs. The department also featured an area with books and reading materials that fanned out before a bench, inviting customers to sit and stay awhile. While PG was at the store, two female customers sat down on the bench, reading materials in hand, and began an animated discussion about health and wellness.
And the Sales Go To…
Each of the five retailers PG visited had a different approach to selling vitamins and supplements. Which one is doing it “right?” The good news is that there’s more than one way to find sales success with vitamins and supplements.
According to HerbalGram, the journal of the American Botanical Council (ABC), in 2009, U.S. sales of herbal and botanical dietary supplements increased in all channels across the board. Sales increased 14.9 percent in mass market channels to $878 million, up from $764 million in 2008. Natural and health food stores rang up $1.6 billion in sales in 2009, up 5.1 percent from 2008. Direct sales accounted for the lion’s share of vitamin and supplement sales in 2009, at $2.5 billion, up a modest 1.5 percent from 2008 figures. (The Austin, Texas-based ABC cited Nutrition Business Journal as its source for this sales channel data.)
In the HerbalGram report “Herbal Supplement Sales Rise in All Channels in 2009,” the Austin, Texas-based American Botanical Council looked at the top-selling herbal dietary supplements in both the food, drug and mass market (FDM) channel, as well as the natural and health foods channel in the United States.
In the FDM channel, cranberry topped the list, with $31.3 million in sales in 2009. Soy ($19.6 million), saw palmetto ($18.8 million), garlic ($17.9 million) and echinacea ($16.2 million) rounded out the top five. HerbalGram used Information Resources, Inc. data for this channel.
As to the top-selling supplements in the natural foods channel, HerbalGram cites SPINS data that puts aloe vera in the No. 1 spot, with $21.8 million in sales. Flaxseed was a close second, at $20.8 million. Wheat or barley grass ($13.2 million), açai ($10.4 million) and tumeric ($10.2 million) completed the top five.
Sales in the vitamin and supplement category are often influenced by the latest medical studies suggesting, for example, that Americans need more vitamin D in their diets, the digestive benefits of probiotics, or the cancer-fighting phytochemicals in cranberries. At Sprouts, vitamin/supplement buyer and category manager Tom Fitzgerald notes that “pH balancers are surging in our stores, with products for maintaining alkalinity in the digestive tract.” He also notes that “interest in immune response builders continues to grow” and “lactoferrin is getting new attention.” Fitzgerald has also seen ayurvedic herbs gaining in popularity — both single herbs and formulations.