Natural Products Insider

JAN-FEB 2018

INSIDER is the leading information source for marketers, manufacturers and formulators of dietary supplements, healthy foods and cosmeceuticals. Since 1997, INSIDER has been serving the needs of the global nutrition industry.

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36 INSIDER January/February 2018 The health care practitioner channel is one of the most dynamic segments of the natural products industry—a sub-market characterized by strong, steady growth, product innovation and, recently, the involvement of major, multinational players. With a 10-year compound annual growth rate (CAGR) of 8.3 percent, the practitioner channel is outpacing big box and specialty retail, where the CAGR ranges from 4.5 to 6.2 percent, according to Nutrition Business Journal (NBJ). Practitioner sales topped US$3.7 billion in 2016, accounting for roughly 9 percent of all supplement sales. That's up from 6.6 percent in 2003. The growth refl ects the public's strong desire for non-pharmaceutical, nutrition- based medical options and a growing acceptance of supplements by conventionally trained practitioners, as well as an increase in the number of clinicians seeking new revenue streams to make up for declining insurance reimbursement. Holistic Primary Care's 2017 practitioner survey indicated two-thirds (67 percent) of respondents are looking for additional ways to increase their income. Of these, 46 percent are thinking about selling supplements as a revenue option. The $3.7 billion sales fi gure also indicates a small but signifi cant segment of the consumer population is willing to pay premium prices for nutraceuticals perceived to be safer, of higher quality and possibly more effective than brands obtained in direct-to-consumer (DTC) retail. Despite the turbulence in health care, the erosion of doctor-patient relationships and the pre-eminence of "Dr. Google," many people still value a clinician's one-on-one recommendations, and view their practitioners as trusted health authorities. According to the SORD (Supplements, OTC, Rx Database) study, 64 percent of supplement consumers said physician recommendations are a major infl uence on their purchase decisions. So, how large is the base of the practitioner channel? It's a simple question that's not so easy to answer. In part, this is because the term "practitioner" can encompass a wide spectrum of health care disciplines. The number will vary depending on whether one includes health coaches, nutrition counselors, nurses, physician assistants, massage therapists, oriental medicine practitioners or others, along with M.D.s, naturopaths and chiropractors. However, the best current estimates suggest between 175,000 and 250,000 health care professionals are actively selling supplements (not including nurses or pharmacists). In Holistic Primary Care's survey, 63 percent of the 661 responding clinicians are currently dispensing supplements. Among the conventionally trained M.D.s and D.O.s (40 percent of the cohort), the number was somewhat lower at 53 percent, but still an encouraging proportion. Most (80 percent) of the respondents are discussing supplements with patients at least daily, and 94 percent of non-dispensing clinicians still recommend some supplements to their patients. Compared with major DTC retail brands, companies serving the practitioner channel are still fairly small. NBJ estimated only three players generate more than $100 million annually, and 16 companies are in the range of $20 million to $100 million. There are 51 brands in the $5 million to $20 million range, and close to 300 small brands, many of which are practitioner private-label brands, doing less than $5 million. The major players in the segment— companies like Pure Encapsulations, Metagenics, Designs for Health, Thorne Research, Integrative Therapeutics, Ortho Molecular Products, Standard Process and others— have long legacies and deep histories within various practitioner subsets. The practitioner space is still something of a "boutique" industry—relatively small companies with high-quality products at premium prices, serving a clientele of solo or small group practices. Several of these companies have ventured into medical food products, those by FDA authority designed for the nutritional management of certain disease states. But, by and large, professional-only nutraceuticals have not penetrated the major hospital systems or large clinic networks. This may be changing. The establishment of a high-profi le functional medicine center at the Cleveland Clinic two years ago bodes well for the fi eld. Practitioners at this center—which hit maximum patient volume immediately after opening, and is undergoing a major expansion—freely use many practitioner-only supplement brands as basic clinical tools. Though the functional medicine center is merely one small star in the massive Cleveland Clinic galaxy, it represents a major step forward for the mainstreaming of supplements into conventional care settings. Nestlé's recent acquisition of Atrium Innovations—the Canadian company that holds several top practitioner brands (Pure Encapsulations, Seroyal, Douglas Labs and Sedona Labs) as well as the Garden of Life retail brand—is another sign of growth. The $2.3 billion deal puts Atrium's brands into a global distribution network, with deep reach throughout both retail and institutional (e.g., hospitals and nursing homes) health care. Some practitioners who currently dispense Atrium's practitioner-only brands have voiced discontent that these products will now be owned by a multinational "candy company" with a poor track record Health Practitioner Channel Practitioner Channel—Pitfalls and Opportunities for Supplement Brands by Greg Stephens and Erik Goldman Despite the turbulence in health care, the erosion of doctor- patient relationships and the pre-eminence of "Dr. Google," many people still value a clinician's one-on-one recommendations, and view their practitioners as trusted health authorities.

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