Scope and Methodology

The Scope of This Report
Report Methodology

The Products

Definition of "Nutraceutical"
Ten Main Nutraceutical Categories
Nutraceuticals Also Classed by Applications

The Market

Sales of Nutraceuticals Soar to Nearly $16 Billion
Table 1-1: U.S. Retail Dollar Sales of Nutraceutical Food Products, 1995-2004 (dollars)
The New Wedding of Medicine and Nutrition
Infant Formula and Adult Nutritional Drinks Take One-Third of Sales
Figure 1-1: Share of Retail Dollar Sales of Nutraceutical Foods, by Product, 1999 (percent): 11 categories/segments

The Marketers

Number of Nutraceuticals Marketers Difficult to Gauge
The Field of Nutraceuticals Marketers Is Still Not Crowded
Growing Pains: No Proven Pattern of Entry into the Mass Market
Nutraceuticals Advertisers Hike Spending to $313 Million

Distribution and Retail

Nutraceutical Channels Include Grocery, Pharmacy, Mass Merchandise, Other Outlets
Sales Forces Target Retailers and Doctors
Nutraceuticals Still Scattered about the Supermarket
Assortment Is at Once Vast and Small

The Consumer

Almost 32 Million Decision Makers Controlling Their Diets
Weight, Fat Intake, Cholesterol Are Top Reasons for Controlling Diet
Table 1-2: Reasons for Controlling One's Own Diet, 1999 (number and percent): 12 reasons
Demographic Factors in Diet Control versus Noncontrol of Diet
Other Demographic Data

Introduction

The Scope of This Report
Still a "Virtual" Market
Definition of "Nutraceutical"
"Functional" Often Synonymous with "Nutraceutical"
Fortified Foods and Dietary Supplements Are Related but Separate Markets
Some Overlap Is Unavoidable
Glossary
Amino Acids
Astragalus
Carbohydrates
Designer Foods
Diuretic
Echinacea
Enriched
Enterals (Enterics)
Flavonoids
Fortified
Garlic
Genistein
Gingko Biloba
Ginseng
Glucosamine—Chondroitin
Green Tea
Gotu Kola
Guarana
Hyper-Nutritious
Isoflavones
Kava Kava
Mineral
Monoterpenes
Mood Food
Optimum Food
Parenterals
Pharmafoods
Phytochemicals
Polyphenols
Probiotics
Protein
Pyruvate
Reservatrol
Ribose
Smart Food
Spirulina
Stanol Ester
Vitamins
Xylitol
Zinc

The Products

Ten Main Nutraceutical Categories
Infants' Nutritional Products
Comprehensive Nutritional Drinks
Confections/Desserts
Cereals
Other Beverages (Teas, Soft Drinks...)
Dairy and Dairy Substitutes
Baked Goods
Ingredients/Condiments
Salty Snacks
All Other
Nutraceuticals Also Classed by Applications

Regulatory Issues

The Agencies Involved
The Food and Drug Administration (FDA)
United States Department of Agriculture (USDA)
The Federal Trade Commission (FTC)
Key Legislation
Nutrition Labeling and Education Act of 1994 (NLEA)
Dietary Supplement Health and Education Act of 1994 (DSHEA)
The Orphan Drug Act of 1983 (ODA), and The Orphan Drug Amendments of 1988
The FDA's Eleven Permissible "Relationship" Claims
Disclaimers
The Lack of Patent Protection
Pending: The Nutraceutical Research and Education Act

Market Size and Growth

Sales of Nutraceuticals Soar to Nearly $16 Billion
Table 3-1: U.S. Retail Dollar Sales of Nutraceutical Foods and Beverages, 1995-1999 (dollars)
Figure 3-1: U.S. Retail Dollar Sales of Nutraceutical Foods and Beverages (dollars)
Health Awareness, Regulation, Convenience, and Age Trends Have All Driven Sales
A Host of Highly Disparate Market Estimates

Factors in Future Growth

The New Wedding of Medicine and Nutrition
Overall Wellness a New Idea
The State of the Nation's Health
Convenience of Nutraceuticals Helps Folks to Comply with Restricted Diets
The Nutraceutical Image: Medicine or Punishment
But Does It Taste Good?
The Graying of America
Table 3-2: Projection of U.S. Population by Age, 2000, 2005, 2010 (number): 6 age brackets
Boomers = Middle-Agers
Nutraceuticals and Generations X, Y, and Z
X
Y
Z
Assortment Boosted by Improved Biological Measurements
Science Considers Foods to Be Delivery Systems
Global Marketing Calls Attention to the Nutraceutical Way
Respect for Alternative Medicine
Outlooks for Particular Categories
Infant Nutritional Products
Comprehensive Nutritional Drinks (CNDs)
Confections/Energy Bars/Sweets
Cereals
Other Beverages
Dairy and Dairy Substitutes
Baked Goods
Ingredients/Condiments
Salty Snacks
All Other

Projected Sales

Nutraceuticals to Break the $20 Billion Mark by 2004
Table 3-3: Projected U.S. Retail Dollar Sales of Nutraceutical Foods and Beverages, 1999-2004 (dollars)
Figure 3-2: U.S. Retail Dollar Sales of Nutraceutical Foods and Beverages (dollars)

Market Composition

Infant Formula and Adult Nutritional Drinks Take One-Third of Sales
Table 3-4: Share of Retail Dollar Sales of Nutraceutical Foods, by Product, 1999 (percent): 11 categories/segments
The Grocery Channel Captures over Half of Sales

The Marketers

Number of Nutraceuticals Marketers Difficult to Gauge
Types of Marketers Involved
Some Marketers Associated with Specific Retail Channels
Table 4-1: Selected Nutraceutical Foods Marketers and Their Brands, 2000 (listing): 32 marketers, 71 brands

Marketer and Brand Shares

Special Note on Share Data
Unilever/Slim-Fast Dominates Nutritional Drinks for Adults
Table 4-2: Share of U.S. Retail Dollar Sales of Comprehensive Nutritional Drinks, 1998-1999 (percent); 7 marketers, 15 brands
Mead Johnson Has Command of Concentrated Infant Formula Segment
Table 4-3: Share of U.S. Retail Dollar Sales of Infant Formula and Electrolyte Balancers in Concentrated Liquid Form, 1998-1999 (percent); 3 marketers, 9 brands
Mead Johnson Also Rules Powdered Infant Formula
Table 4-4: Share of U.S. Retail Dollar Sales of Infant Formula and Electrolyte Balancers in Powdered Form, 1998-1999 (percent); 4 marketers, 12 brands
Ross the Dominator in R-T-D Infant Formula
Table 4-5: Share of U.S. Retail Dollar Sales of Infant Formula and Electrolyte Balancers in Ready-to-Drink (R-T-D) Form, 1998-1999 (percent); 3 marketers, 9 brands
Johnson & Johnson, Owner of Benecol, Is Top Margarine Marketer
Table 4-6: Share of U.S. Retail Dollar Sales of Nutraceutical Margarines, in Supermarket Outlets, 1998-1999 (percent); 3 marketers, 3 brands
Share Perspective: Quaker's Presence in Hot and R-T-E Cereals Markets
Share Perspective: Other R-T-E Brands Follow Quaker into Nutraceutical Territory
Share Perspective: Celestial Seasonings and Traditional Medicinals Tea Bags/Loose Tea
Share Perspective: SoBe Bottled Teas
Share Perspective: Lactaid Milk

The Competitive Situation

The Field of Nutraceuticals Marketers Is Still Not Crowded
Range of Retail Channels Fragments the Market
Growing Pains: No Proven Pattern of Entry into the Mass Market

Competitive Focus: Abbot Laboratories/Ross Laboratories

Abbot Has Net Sales of $13.2 Billion in 1999
Ross Most Visibly a Force with Ensure
Abbot Also a Major Player in Other Liquid Nutrition Segments
Abbot a Pharmaceutical Powerhouse

Competitive Focus: Bristol-Myers Squibb/Mead Johnson
Nutritional Group

Bristol-Myers Squibb a $20.2 Billion Company in 1999
Mead Johnson Positions Infants' Products on Treatment and Maintenance
A Similar Focus on Nutraceuticals for Adults
Other Bristol-Myers Squibb Products

Competitive Focus: Campbell Soup Company

Net Sales of $6.4 Billion
Four Principal Business Segments
Campbell's Intelligent Quisine Effort Goes Unappreciated

Competitive Focus: Hain Celestial Group, Inc.

A $366 Million Company
The Merger of Hain and Celestial Seasonings

Competitive Profile: Johnson & Johnson

J & J Reports Sales of $27.5 Billion for 1999
Three Main Business Segments
The Benecol Story
Other J & J Consumer Brands

Competitive Focus: Kellogg Company

Net Sales of $7 Billion in 1999
The Ensemble Line Debuts and Disappears
Ensemble Replaced by an Acquisition Campaign
Some Famous Kellogg Marques

Competitive Focus: Procter & Gamble Co.

Sales Approach $40 Billion in 2000
A Cautious P & G About to Enter U.S. Nutraceuticals Market
Product Development Time Accelerated
Prospects for Olestra
Famous P & G Consumer Brands

Competitive Focus: The Quaker Oats Company

A $4.7 Billion Company
Food and Gatorade Segments Combined
Quaker Oatmeal Products Are World's Best-Selling Nutraceuticals
Altus: Quaker's New Partnership with Novartis
Increased Efficiencies
Other of Quaker's Household Names

Competitive Focus: Robert's American Gourmet

An Exemplary Tale for Small Entrepreneurs
Robert's Is Shrewd Regarding Health Claims

Competitive Focus: Traditional Medicinals

Sales of at Least $7 Million
A Longtime Positioner on Medical Value

Competitive Focus: Unilever/Slim· Fast Foods Company

Slim-Fast's New Owner Is a $43.6 Billion Giant
Unilever's Four Major Business Segments
Table 4-7: Unilever's Dollar Sales by Segment, 1999 (percent): 4 segments
Slim-Fast Acquired for $2.3 Billion
Slim-Fast's Positioning Broadened to Encompass Healthfulness
Unilever Already Stressing Nutraceuticals
Other Famous Unilever Brands

Marketing Trends

Accentuating the Positive
Frank versus Implied Product Claims
Repositioning Products for Multiple Audiences, Multiple Distribution Channels

Product Trends

Perhaps a Thousand Nutraceutical Food Products Debut Annually
Extensions Proliferating
SKUs with Herbal Actives
Repositioned Products
Table 4-8: Selected New Product Introductions, 1998-2000 (listing): 33 marketers, 39 brands

Consumer Advertising Expenditures

Nutraceuticals Advertisers Hike Spending to $313 Million
Slim-Fast Leads Field of Ten Major Spenders
Abbot Spending Breaks $51 Million Mark
Quaker Spends $45 Million
Nestle Pumps Ad Monies to $41 Million
Bristol-Myers Squibb in Jump to $34 Million
J & J Ups Budget to $17 Million
Unilever Spends $13 Million to Enter Market
Nabisco Allocates $5 Million
Kellogg's First Foray Supported by $3 Million
GFA Reduces Buys to $1 Million
Other Spenders

Positioning

Dressing Up the Medicine Pitch
Real People
Celebrity Endorsements
Women's Health
A Dual-Positioning: Weight Control and Overall Health
Preventing Dehydration
An Advertorial Regarding Tomato Content

Consumer Promotions

Couponing the Principal Tactic
Two-for-One Offers and Packs
A Book Tie-In
A Customer Service Line That Charges a Fee
Examples of Consumer Promotional Advertising

Trade Shows

Nutracon 2000
The Natural Products Expo

Distribution

Nutraceutical Channels Include Grocery, Pharmacy, Mass Merchandise, Other Outlets
The Traditional and DSD Grocery Paths
Direct Store Delivery
The Pharmacy, Mass Merchandiser, Natural Foods Paths
Sales Forces Target Retailers and Doctors
Some Nutraceuticals Are Rack-Jobbed
Other Factors Affecting Choice of Distribution Mode
Marketing Services/Micromarketing
Grocer Consolidation
Preservatives Use

At the Retail Level

Nutraceuticals Still Scattered about the Supermarket
Margins Vary Enormously
Table 5-1: Supermarket Retailers' Average Gross Profit Margins on Selected Food Products, Including, But Not Limited to Nutraceuticals, 1993-1998 (percent): 18 product categories
Assortment Is at Once Vast and Small
Multipacks, Cases Popular
The MedMax Phenomenon

The Consumer: America's Major Illnesses

AIDS/HIV Has Killed Over 400,000 Americans
Arthritis Sufferers Number 43 Million
Cancer Has Stricken 8.4 Million Living Americans
Cardiovascular Ailments Trouble 60 Million
Table 6-1: Number of Americans with Cardiovascular Disease (CVD), by Type, 2000 (number and percent): 8 diseases/conditions
CVD Mortality by State: A Surprising Regionality
Table 6-2: Rate of Cardiovascular Disease Mortality, by State, 2000 (listing): 4 ranges of mortality
The Common Cold: Children Account for Lion's Share of 60 Million Cases
Diabetes Afflicts as Many as 16 Million
Tens of Millions with Mental Health Problems
Half of All Adults Are Overweight

The Consumer: Lifestyles and Attitudes

Almost 32 Million Decision Makers Controlling Their Diets
Almost 70 Million Decision Makers Do Not Control Their Diets
Weight, Fat Intake, Cholesterol Are Top Reasons for Controlling Diet
Table 6-3: Reasons for Controlling One's Own Diet, 1999 (number and percent): 12 reasons
Demographic Factors in Diet Control versus Noncontrol of Diet
Specific Reasons for Diet Control Skew to Women and Older Decision Makers
Table 6-4: Demographic Factors Favoring Controlling or Not Controlling Diet, 1999 (listing): 12 factors
Table 6-5: Demographic Factors Favoring the Controlling of Diet, by Reasons, 1999 (listing): Blood Sugar, Calcium Intake, Cholesterol Level, Diabetes, Fat Intake, Food Allergy, Heart Disease, Hypertension, Lactose Intolerance, Salt Intake, To Lose Weight, To Maintain Weight, Other; 12 factors
America Says: I Want to Exercise More, I Like Bans on Smoking, I'm Trying to Eat Healthier
Table 6-6: Strong Agreement With Given Statements Concerning Health/Nutrition, 1999 (number and percent): 12 statements
Patterns in Agreement with Health/Nutrition Statements
About Half of Decision Makers Exercise Regularly
Exercisers Are Younger and More Upscale
Table 6-7: Demographic Factors Favoring Strong Agreement with Given Statements Concerning Health/Nutrition, by Statement, 1999 (listing): 12 statements, 12 factors
Table 6-8: Demographic Factors Favoring Regular Exercise within the Past Year, 1999 (listing): 12 factors
One-Third of Americans Choose Foods for Medicinal Value

The Consumer: Brand Use of Nutraceuticals

Slim-Fast, Carnation, Ensure Are Most Popular Nutrition Drinks
Table 6-9: Use of Comprehensive Nutritional Drinks, by Brand, 1999 (number and percent): 10 brands, private label
Disparate Profiles of Nutritional Drink Brand Purchasers
Table 6-10: Demographic Factors Favoring Use of Comprehensive Nutritional Drinks and Weight-Loss Drinks, Brand Used Most Often, 1999 (listing): Boost, Carnation Instant Breakfast, Ensure, Nestle Sweet Success, Slim-Fast, Ultra Slim-Fast; 12 factors
Quaker Instant Oatmeal Is Most Favored Nutraceutical Hot Cereal
Table 6-11: Use of Quaker Hot Cereals, by Brand, 1999 (number and percent): Quaker Instant Oatmeal, Quick Quaker Oats, Old Fashioned Quaker Oats
Patterns in Purchase of Quaker Hot Cereals
Table 6-12: Demographic Factors in Use of Hot Breakfast Cereals, by Brand Used Most Often, 1999 (listing): Quaker Instant Oatmeal, Quick Quaker Oats, Old Fashioned Quaker Oats; 12 factors
Cheerios, Kellogg's Raisin Bran Are Most Popular R-T-E Cereals
Table 6-13: Use of Ready-to-Eat (R-T-E) Cereals, by Brand, 1999 (number and percent): 7 brands
Profiles in R-T-E Cereals Purchase
Table 6-14: Demographic Factors in Use of Ready-to-Eat (R-T-E) Breakfast Cereals, by Brand Used by Most, 1999 (listing): Cheerios, Kellogg's Raisin Bran; 12 factors

Appendix II: Addresses of Selected Marketers