It has been a few months since the last update...
So much has changed and so much has not – The big trends are getting bigger but so are the challenges – lets go!
Expo West 22’ and what I noticed will be the key thematic of this posting.
Based on the enthusiasm and size of the crowd, no one can doubt that the state of the industry is pretty awesome. It was great to be back and “live” with the surging crowds and packed aisles of a trade show floor. It was also a little scary that so few masks were being worn. (Yes there was some documented spread of omicron at the show and a few folks returned home sick – not quite a super spreader but sobering). The energy and enthusiasm of vendors and attendees was quite positive. There were some noticeable non-attending groups, specifically vendors from China were much less abundant as were teams from Southeast Asia and India.
So, what did we see??? Plant based everything, especially proteins sources, mushrooms sprouting up like after a spring thunderstorm (but it was in fact mostly mycelial and not fruiting bodies), lots of probiotics, fermented foods and ingredients, Immune health is not taking a break & wait for it … gummies, Gummies and MORE GUMMIES!!!!
Other trends and discussions were not as sanguine. The last half of 21’ and the first weeks of ‘22 the topics everyone wanted to discuss were the Virus and Supply Chain. Up until February, the two were inextricably linked and intertwined, this changed on 24 February 2022. I don’t think anyone anticipated how significant and far reaching the consequences of the invasion by Russia of Ukraine would be, and I think the longer-term implications still escape most of us. This said the Virus is not over.
Let’s unpack what we know about the implications of the war and circle back to the virus…
Ukraine and far western Russia has been the breadbasket to Europe and much of North Africa for decades. Approximately 12% of global food calories and 25% of the wheat and grain supply come from this region. There are specific crops such as sunflower, largely used for oils, that Ukraine supplies some 50% of the global market. There WILL BE a global food crisis, hunger, and massive inflation in food prices. This typically has massive political implications and will result in real human suffering. Not to underemphasize these much more important implications this war, what does this mean for supplement ingredients? I would expect sunflower based actives such as Lecithin, Phospholipids, and CLA (for weight loss) to increase in price. Bovine, Porcine, Avian and perhaps Piscean based ingredients will also likely increase in price. Think Gelatin and Collagen as feed prices escalate. Herds and flocks are already being culled in anticipation of these impacts. Agricultural yields elsewhere in the world are also likely to be significantly impacted as Russia is the world’s leading exporter of fertilizers supplying some 23% of ammonia, 14% of urea & 10% of processed phosphate. Going into the war (January ’22) fertilizers had already doubled in price from 18 months prior. We need to add to this the implications of not using Russian petrochemicals. These fuels drive the factories that produce a significant portion of the world’s extraction and purification equipment. Less known is that many ingredients rely on petrochemical derived building blocks or extraction solvents. Supply will get seriously tight!!!
Not all is bad news on this front. There is a silver lining!
The realization that just spraying fertilizer on the field, or even directly on the plants, does not guarantee growth has grown to “common knowledge” in the past 5 years. It turns out that soil microbiome, total organic matter, and the presence of health soil metabolites that act as growth accelerators determines and drives nutrient uptake by plants, and their resulting health, and the nutrient value of the crops that come from them. This is a huge boon for the emerging practice of regenerative agriculture that holds soil health replenishment as a core principle. Regenerative agriculture produces measurably more nutritious foods, and botanical extracts with higher levels of the phytoalexins that we use as bioactive compounds from plant medicines. A virtuous side effect, and for some the core driver of the shift to regenerative agriculture, is that fields become massive carbon sinks depositing tons of carbon per acre per year back into the soil. Some experts postulate that the only achievable mechanism for Co2 reduction in the atmosphere is to leverage the greatest human endeavor, agriculture, and convert it from a Co2 and Nitrogen source, into a consumer of these powerful human activity driven drivers of climate change. Additionally, as we transition off our addiction to Russian (and other) petrochemicals we will become increasingly committed to sustainable, renewable, and hyper-local energy, as well as plant derived biomass versus synthetic chemistry. Let the Green Revolution Begin – Thank you Vlad!!!
Back to the Virus – Omicron, Omicron Plus, BA.1, BA.2, XE and other variants still appear to be capable of great mischief and have driven significant shutdowns and quarantine events in China. (Shanghai is currently closed) This has closed factories and further snarled shipping. The implications for the nutraceutical supply chain are significant. Any ingredients that are produced in China will be impacted. Think B-12, Folic Acid, CoQ10, Biotin, and many botanicals and Nutraceuticals such as Glucosamine, Chondroitin & Amino acids.
Back to trend spotting and innovation…
Many experts (and commentators such as myself) had anticipated that the fall off in the immune category would be greater than it actually was. Indeed, there is significant retraction in commodity immune ingredients such as Vitamin C, Zinc, Elderberry, and unfortunately Vitamin D. But the category has significant innovation and pockets of growth that are important to recognize. Immune training or preparedness has emerged as a driving concept aligned with consumer thinking that they need a strong immune system all of the time, not just when seasonal colds and flu are circulating. Beta Glucans from yeast and mushrooms, Postbiotics like Kyowa’s Immuse®, and new ingredients like Benicaros® from NutriLeads are emerging. Perhaps the most striking attribute of this growth is who is introducing category changing products. CVS launched Immuse®, the new Bayer brand, Stem and Root launched Benicaros, and Bausch and Lomb also launched a novel immune formula, Immune Duo with a new ginseng extract. Big CPG is not where we traditionally looked for cutting-edge innovation but here we are. I also expect a significant uptick in Immune Plus products and formulations as the product offerings align with new thinking on this segment. It has become increasingly clear that immune wellness is not just dependent on supporting the innate or adaptive immune system directly but also other systems and functions in a health body. Sleep and Stress have emerged as one of the fastest growing categories for supplements and combining the power of Adaptogens to support increased tolerance to stress and improved sleep quality influences the single biggest contributor to either robust or impaired immune function. The natural coupling of Immune and Gut health especially with the increased awareness that 70% of immune cells are located in the GALT (Gut Associated Lymphoid Tissues) and greatly impacted by barrier function, proper uptake of nutrients, and reduction of gut-based inflammation. Other similar connections are being made with Skin and barrier function if mucus membranes, bones health and “nursery of immune cells” that is a key function of health bone marrow. Immune and Sport is also becoming an opportunity, especially with hydration and recovery focused product offerings. There are other possible immune plus opportunities that are emerging in the market and in the conversations driven by ingredient manufacturers and researchers.
The Evolution of the dose is now quantifiable and significant. NBJ published a report that the long dominance of the solid dose (Pills, Tablets, Capsules, and softgels) that have been leading since 1900 B.C. were surpassed in 2019 by other delivery systems, notably Gummies and Powders. While I question the data as ancient medicine was largely tea, decoction, cordials, and tinctures, change is clearly afoot and consumer preferencing is changing. I have previously advocated for a Gummy line of basic products and have forwarded offerings for the same, I will stand by and emphasize this advice. It would appear that there is not yet an iconic gummy brand in Europe akin to Ollie or Smarty Pants in the states. This is thus an achievable goal that I feel is worthy of a significant investment.
The trends that continue…
Sleep, stress, and mental wellbeing will be with us for the foreseeable future – look for more nuanced offerings and mission driven companies with social giveback and engagement. Brands that are authentically engaged in their category in non-commercial ways are showing success with consumers and the investment community
The Eye’s have it!!! This includes nootropics, esports, knowledge workers, Zoom fatigue, device exhaustion, age related eye health, and managing eye disease. Authentic e-Sports brands are succeeding while outsiders can not get traction, conversely it would appear that legacy brands do better in Eye Health as they leverage trust. Cognition brands stand between with authentic Neuro-hackers, large CPG, DTC startups and legacy nutrition players all taking market share. In all of these spaces have expert endorsements is important.
Shroom Boom – perhaps the fastest growing category and the one with the highest probability of mergers and failures. Look for new species outside of the dominant 5 (Reishi, Shitake, Maitake, Cordyceps & Lions Mane). Look for mushroom proteins, flavor enhancers (MycoTech) and fibers for non food use.
Fermentation enhanced ingredients will continue to increase in popularity – the growth in both microbiome support (Pro, Pre, Post and Syn Biotics) as well as regenerative agriculture will support this fermentation trend. The emergence of real data demonstrating improved bioactivity of fermented ingredients will also drive this trend.
Personalization continues. The pace of innovation and investment in this sector is not slowing down and the evidence is building that personalized programs deliver better results. The question remains if the difference in results from personalized programs are equivalent to the increased cost. It is likely that costs for personalization will continue to decrease, and efficacy will continue to improve, but most customers do not think we are at the right balance yet.
Beyond Biotics – There has recently been a number of significant post biotic ingredient launches thus one can expect that within the next 6-12 months there will be a similar increase in consumer facing products. There are also increasingly sophisticated and specialized symbiotic product offerings, notably probiotics with prebiotics that are driving intertest in the larger Biotics category. Psycho-biotics are getting a lot of media attention as are slim-biotics with significant increases in product launches and consumer interest.
Return to Active continues with both specialist DTC and non-traditional sales channel launches coupled with significant acquisitions by global strategic CPG companies in the active nutrition market. The category is up 40% YoY with growth being led by Pre-workout, Post-workout, Hydration & Joint Health categories. Sustainability, Plant Based, Clean Label, third party certifications important successful product attributes.
Women take the lead. The entire industry is recognizing that elevating women is essential to success. From the board room and C-Suite to the laboratory and innovation plan through to multiple categories of women centric and specific offerings. If your product plan does not pay attention to woman’s needs, its broken! It would also appear that not having women fully represented in leadership of a company is detrimental to the public image of the company. This aligns well with the long-demonstrated fact that companies that are diverse in their leadership perform better. The natural next step on this journey is that other forms of diversity will be increasingly valued and expected. From a market perspective there is a huge increase in women’s specific products with multiple categories PMS, Menopause, bladder, UTI, and Yeast relief, and woman’s sexual wellness. Traditional womans categories like beauty from within are becoming increasingly sophisticated and science driven. Woman’s active nutrition is likely a significant growth opportunity as most of the products and research have been male dominated and clearly the “Shrink and Pink” strategy of conversion for women is not effective.
Kids Nutrition is having a moment with a significant emergence of new snacks, beverages, a wide array of supplements including biome, multies, immune, growth, stress, sleep, and other condition specific applications. The dose forms are fun and taste forward and not limited to traditional delivery systems.
UpCycling is emerging as an ingredient trend for both foods and supplement ingredients. Getting the most out of what we produce and elimination of waste sits ahead of our next trend.
Sustainability will continue to increase in importance but at this time basic supply chain challenges, busy contract manufacturers, inflation worries, and being successful without sustainability are slowing progress for most brands. I anticipate a significant transition to brands using durable containers (potentially smart bottles) and replenishment pouches to grow significantly. Alternately recyclable, post-consumer recycled, and biodegradable and compostable packaging components will be in demand.
Looking forward to learning and sharing more in the coming months as I travel to Geneva for Vitafoods, the US for NBJ Summit, and likely lots of other stops along the way.