At first glance, a marriage of personal care products and vitamin supplements seems to be a match made in heaven. After all, women have slathered on skin care concoctions laced with vitamins such as A, C and E for years. It only stands to reason that such well-known beauty care companies as Elizabeth Arden, Chanel and Estée Lauder should be eager to market these same vitamins in capsule form, not to mention a full complement of herbal supplements such as ginseng and ginkgo biloba.

But interestingly enough, most of the best known marketers in the personal care industry have remained on the sidelines while sales in the vitamin, mineral and supplement category have surged.

According to Information Resources, Inc., Chicago, IL, sales of vitamin supplements in U.S. food, drug and mass merchandisers climbed 29.2% to $2.9 billion for the 52 weeks ended June 30, 1998. Strong sales growth for vitamin supplements is expected to continue for the foreseeable future, according to market researchers. Packaged Facts, a New York research firm, predicted that 1998 retail sales of vitamins, supplements and minerals will jump 13% to $8.2 billion. Further down the line, sales of these products are projected to top $12.3 billion by 2001, representing a compound annual growth rate of 13.6%.

According to industry experts, the U.S. market is being driven by two factors: an aging population and consumer willingness to try alternative therapies to improve their health.

"Baby boomers are inclined to take care of themselves to prolong an active life and people are becoming disenchanted with the side effects of drugs," noted Stan Weiss, Senior Director of Research, Interior Design Nutritionals, a division of Nu Skin Enterprises, Provo, UT. "They're willing to try natural products to maintain healthy levels of cholesterol or healthy, normal joints."

Demand for these products is not limited to the U.S., however, and many established direct selling companies have a relatively easy entry into emerging markets due to their built-in distribution channels. After all, while GNC and others have to spend millions to build stores, direct sellers can just start knocking on doors once they've built up their sales force.

"It's a worldwide trend," agreed Chris Horvath, Manager for Nutrition and Wellness, Amway, Ada, MI. "The consumer has become open to new concepts about treating old-age ailments. They're willing to try something that's plant-based rather than settle for a traditional (drug based) Western cure."

Unknown Terrain For Many

The lure of double-digit growth rates should be enough to entice personal care companies to gain at least a toehold in this fast-growing category-no matter how tenuous it may be. After all, in the U.S and most developed countries, the personal care industry is mature, with most categories expanding only as fast as the population grows.

Yet the best-known cosmetics manufacturers remain unswayed by the statistics. For now, at least, many appear to be content to leave the market to direct sales companies that offer everything from vitamin supplements to lipstick to cookware.

"We talked about entering the (vitamin supplement) category some time ago," admitted Tony Vargas, Manager of Skin Care Product Development, Elizabeth Arden, New York, NY. "But it would put us in a category that we know nothing about."

Mr. Vargas noted that regulations vary greatly between the two categories. For example, while DSHEA regulations have had a major impact on how vitamin supplement companies go about their business, the cosmetics industry has enjoyed self-regulation for decades. Even though they fall under FDA jurisdiction, the Feds are usually too busy watching pharmaceutical companies to pay a lot of attention to cosmetics manufacturers and these companies are only too happy to maintain a low profile.

"Chanel pioneered the use of vitamins in cosmetics back in 1981 when we incorporated vitamins A, C and E in our treatment products," recalled Dr. Jack Mausner, Senior Vice President, Research and Development, Chanel, New York, NY. "We're great believers in the antioxidant properties of topically-applied vitamins. But when taken internally, they come too close to making drug claims."

Regulatory differences aside, making the transition from compact to capsule would not be easy. Mr. Vargas noted Elizabeth Arden's manufacturing expertise does not include vitamin production. "Who could manufacture them for us?" he asked. "We'd have to contract out and then it would become a matter of qualifying the contract manufacturer."

Even if Arden managed to find the right manufacturing partner for the job, Mr. Vargas insisted that the company's traditional retail distribution channel, the department store cosmetic counter, is not conducive to peddling vitamins. "It's easy for Avon because its door-to door operations lets representatives sell a variety of things-not just cosmetics. It's an easy fit."

A New Alliance

An easy fit indeed. According to the Direct Selling Association, wellness products, including vitamins and weight loss products, accounted for 17.7% of the direct selling industry's $22.21 billion in 1997 U.S. retail sales (see pie chart). Executives at direct selling companies insist that direct sales provides the perfect atmosphere to educate consumers about the importance of vitamin and herbal supplements.

"There's a lot of clutter in health food stores," noted Michael Rosen, Executive Vice President and Chief Executive, Marketing, Corporate Development, Herbalife, Provo, UT. "Consumers have to choose between 10 different vitamin brands and the shopkeeper doesn't have the product knowledge to give them help. Our distributors know all about our products and they follow up with a phone call after a sale. The store manager would never call and ask how you're doing."

Avon, New York, NY, entered the vitamin supplement category in 1994 with the introduction of Avon Life. But the world's largest direct seller of cosmetics was a latecomer to the vitamin supplement category. Other personal care manufacturers such as Amway, Herbalife, Los Angeles, CA and Nu Skin have been active in the segment for decades-developing novel products in dedicated labs, offering targeted products for specific age categories and even growing their own ingredients to ensure a consistent supply.

With interest in vitamins booming, these companies are rolling out new products, forging new alliances and studying new ingredients to boost sales and gain a larger slice of the market. For example, in October Nu Skin Enterprises acquired privately-held Generation Health Holdings, the parent company of Pharmanex, Simi Valley, CA, a leading research and development company of natural health supplements (for more information, see Top of the News, p. 6). Nu Skin officials said they will fold Nu Skin's existing Interior Design Nutritionals (IDN) business into the Pharmanex unit and retain the Pharmanex name.


"The Pharmanex acquisition is evidence that we're not just dabbling in nutritionals," noted Mr. Weiss. "We want to remain world class in terms of developing scientifically superior products with proven efficacy."

Pharmanex's products are made from naturally occurring plant-based substances. The company, which had sales of $12 million for the first nine months of 1998, currently sells 33 standardized botanicals and five proprietary natural dietary supplements through retail outlets in the U.S. Some of Pharmanex's best-selling products include:

- Cholestin, derived from Monascus purpureas went (red yeast rice), which has been shown to help maintain healthy cholesterol levels in the body;
- CordyMax C2-4, derived from Tibetan Cordyceps sinesis mushrooms, which promotes vitality and stamina, reduces fatigue and promotes healthy lung function;
- BioGinkgo 27/7, made using a proprietary ginkgo biloba leaf extraction process, which supports memory and concentration and promotes peripheral circulation;
- TêGreen 97, made from green tea, which provides potent antioxidant support in the presence of pollution, stress and toxins; and
- Bio St. John's Wort, a proprietary blend of St. John's Wort and CordyMax, which promotes positive mental outlook and mood, reduces fatigue and promotes healthy emotional balance.

Behind this cadre of products, Pharmanex has a full complement of research and development personnel. In fact, its strong R&D capabilities is one of the biggest reasons Nu Skin was attracted to the company in the first place, according to Tonya Fischio, a Nu Skin spokesperson. "The entire Pharmanex company is based on the science of supplementation and working with nature," noted Ms. Fischio. "They have 30 Ph.D.'s and scientists and a strong relationship with the university and medical communities, so it's a perfect fit for us."

For example, Pharmanex has collaboration agreements with China's Institute of Materia Medica, Beijing Medical University, Shanghai Medical University, Columbia University, the University of California Los Angeles and Kansas University. Several of these links should help Nu Skin find a bigger audience for its products in China.

"We believe that Pharmanex's extensive contacts and familiarity with the greater China region will enhance our future opportunities for growth in the People's Republic of China and also in Taiwan, where we have only begun to penetrate the large health supplementation market," said Steven Lund, President and CEO of Nu Skin Enterprises, in a statement.

Advanced R&D

Nu Skin isn't the only direct seller with a strong partner in the supplement industry. Back in 1972, Amway became a majority stakeholder in Nutrilite, one of the biggest direct sellers of dietary supplements in the U.S. But ties between the two companies run much deeper than that. Back in the 1950's, years before they founded Amway, Rich De Vos and Jay Van Andel were Nutrilite sales reps. The bond was made even stronger in 1995 when Nutrilite became an Amway division and today, Amway executives insist that Nutrilite is the best-selling brand of vitamins in the world. For the year ended August 31, 1997, Nutrilite had sales of $1.4 billion. Fiscal 1998 sales were not available at press time.

Nutrilite has a long history. The company, originally called California Vitamins, was founded by Carl Rehnborg in 1934. Dr. Rehnborg is credited by many as the man who developed the first multivitamin, multimineral food supplement in the U.S. The company's name was changed to Nutrilite in 1939.

Today, the best-selling SKU in the Nutrilite line is Double X, a multivitamin/multimineral supplement. It is purported to contain exclusive Nutrilite concentrates that provide more plant compounds than the leading supplement in the U.S. Double X also contains 23 vitamins and minerals. "It's the cornerstone of our supplement line," explained Ms. Horvath.

Beyond Beta-carotene

According to executives who spoke to Nutraceuticals World, phytonutrients will continue to play an important role in new product development. When NuSkin acquired Pharmanex, it not only boosted its R&D capabilities, it also acquired contract cultivation areas in China and Chile, not to mention a raw material extraction facility in Huzhou, China, a research and development center in Shanghai and a clinical and pharmacology center at Beijing Medical University.

"Phytonutrients offer us a broad variety of active agents," noted Win Duersch, Nu Skin's director of technical services and chief scientist. Lutein, a marigold derivative, is a powerful antioxidant that can aid ocular function. Pycnogenol, originally derived from pine bark, is another antioxidant that has garnered plenty of media attention.

Although some phytonutrients can be produced synthetically, Dr. Duersch said many of these materials naturally contain trace levels of other actives that work synergistically with the primary ingredient. "These other materials really facilitate the active component," he noted.

To help identify other phytonutrients, Amway's Nutrilite division established the Rehnborg Center, located in Lakeview, CA. Dedicated two years ago, the center conducts basic research and development and designs new product concepts. According to Sam Rehnborg, president of the Rehnborg Center and son of Nutrilite founder Carl Rehnborg, recent research has led to a host of new developments in the understanding of carotenoids. "There are a host of carotenoids, including lutein and lycopene, that appear to work on different membranes," noted Dr. Rehnborg.

He said that lutein is the most likely antioxidant candidate to enjoy strong growth in the future. "The role of phytochemicals to reverse antioxidant deficiencies will continue to grow. We now realize that antioxidants can help lengthen life and maximize the quality of life."

The Rehnborg Center is also working with Beijing Medical University to study the impact that the Hawberry has on the cardiovascular system to lower cholesterol and blood pressure. "It's been in the Chinese diet for some time and has several unusual properties," noted Dr. Rehnborg. "We're trying to get on top of the berry's phytochemical properties and make them available as a concentrate in drink supplements."

Herbalife Weighs In

New product development and geographic expansion have had a huge impact on Herbalife's supplement business. This year the company has introduced 35 new products and expanded distribution of well-established brands such as Herbalifeline, an Omega-3 fatty acid supplement. The company, founded in 1980, is primarily known for its weight loss products, but Mr. Rosen noted that nutritional products play an important role in weight loss management.

"We've offered protein powders with amino acids, multivitamins and fiber tablets right from the beginning," noted Mr. Rosen. "If a person follows a good nutrition plan, it is easier to lose weight."

Herbalife's best-selling products include a protein drink mix, herbal concentrate (a tea product) and Herbalifeline. These products, together with the recent introduction of ginseng and kava kava supplements, has helped Herbalife's U.S. sales increase 22% this year. Even Japan, despite its recent economic woes, has been a huge growth market for Herbalife.

"We've grown throughout the Japanese recession," boasted Mr. Rosen. "Recessions typically give us recruiting opportunities because people are eager to supplement their incomes."

Herbalife entered Japan just four years ago, but it already accounts for sales of $550 million (retail). Although Mr. Rosen declined to comment on new product development, he did say that new launches, combined with further expansion of existing products, should increase sales and earnings at least 15% a year.

Adopting A Keep It Simple Approach

Although firms such as Nu Skin, Amway and Herbalife may be leading the way in terms of research, they certainly haven't cornered the market. As previously noted, Avon offers a complete line of nutritional supplements under its Avon Life brand. Avon Life consists of five multivitamins and mineral formulas; six extra-support supplements and two herbal supplements.

The formulas are designed to make it easy for women to get the nutrition they need. A national survey of 511 women, conducted for Avon by Opinion Research Corporation, Princeton, NJ, identified a gap between what women believe they should be doing to stay in good health and how they actually live their lives. According to the survey, both a lack of motivation and lack of time make it difficult for many women to exercise, eat right and, of course, take vitamins.

The survey showed that six out of ten women who did not practice good dietary habits said it was "too much trouble" as did 48% of those who do not exercise or take vitamins. To make a healthy regimen as easy as possible, Avon's formulas are pretty basic. Specific formulas are aimed at women between 20 years old and menopause and from menopause to post-menopause, with multivitamins for kids and teens and a formula for men too.

Nu Skin's Interior Design Nutritional (IDN) business, which has been folded into the newly-acquired Pharmanex unit, takes that same keep-it simple approach to vitamins. The LifePak product line includes five combinations of vitamins and nutrients to meet specific consumer needs. LifePak's 1997 sales totaled more than $200 million.

In September, Nu Skin released the results of independent clinical research showing the effectiveness of LifePak to provide improved antioxidant protection. The study, conducted by Research for Health, an accredited medical research clinic in Houston, TX, found that participants taking LifePak for six weeks absorbed significant levels of antioxidants into their blood and improved low-density lipoprotein resistance against free radicals.

Like Avon, BeautiControl entered the vitamin supplement category in 1994. The Carrollton, TX-based company had sales of $69 million in 1997, but the overwhelming majority of sales came from personal care products. BeautiControl has no plans to increase its exposure in the supplement category, said Evelyn Browning, a company spokesperson.

"We'll stick to growing our customized skin care business," said Ms. Browning. "Our vitamin supplements business is enjoying steady growth; it's building slowly as consumers learn how important supplements are." For the record, BeautiControl's best-selling supplement is Skin Nutrition Complex, according to Ms. Browning. The supplements are recommended to clients according to skin type, such as oily or dry. "The formula for oily skin contains ingredients that are known to break down fats and lipids and help flush these fats through the body more efficiently," said Ms. Browning.

Future Growth

Although BeautiControl may balk at growing its vitamin supplement business aggressively, other marketers are devoting plenty of R&D dollars toward finding the next big thing. Ms. Horvath noted that Amway is studying isothiocyanates, which reportedly stimulate the production of anti-cancer enzymes. "It's still in the research and development stage," said Ms. Horvath. "We don't introduce products until we have the data and supplies to back them up."

Other growth opportunities may come from amino acids, fatty acids and probiotics. The latter are friendly bacteria to help maintain a good balance of flora in the body, since antibiotics tend to kill off some of the good bacteria in the body, noted Ms. Horvath. "We continue to study fiber too. It's still an important nutrient and you need the right balance for colon health."

Besides improving the digestive system, Nutrilite researchers are also studying natural ingredients that can help improve the vision of older consumers. Ms. Horvath singled out such materials as bilberry, a European blueberry that has traditionally been used to improve night vision, and the aforementioned lutein, which concentrates in the macula to maintain vascular integrity of the eye. Nutrilite already offers a combination of these materials in its Visionary Formula supplement.

Thanks to novel research and reams of supporting data, most direct sellers of natural products insist the industry has entered a new paradigm. "The science of natural alternatives to drug therapy has been advancing at an unprecedented level," said Dr. Weiss. "Herbal remedies such as echinacea and red rice yeast have wonderful effects with no side effects. We've reached a new level of credible, natural products."