The 10 companies selected as Nutraceuticals World's industry innovators were chosen based on a criteria of innovation in science and technology, marketing strategies or product development, sustaining value, solving consumer problems or sparking growth through new paradigms, just to name a few.
First, let's attempt to define innovation. All of the executives interviewed offer their definitions in the following pages, as well as speculate on the industry as we know it today and the industry of the future. Tom Peters, author of The Circle of Innovation, said, "Innovate or die." He also equates innovation to "eraser mania, where failure is good, customer service is imperative and commoditization is not inevitable." Mr. Peters challenges companies to follow the "WOW" of their existence, not the customer. "The customer is a rear-view mirror, not a guide to the future," said Mr. Peters, which should be words to live by in an industry like ours, driven by consumer whims and a quest for the next hot product.
The Economist last year (2/20/99) attempted to define innovation by doing an international industry survey; here's an excerpt: "Innovation is more than creativity. Creativity is about generating new ideas and concepts (this is a step in innovation). For creativity to result in innovation, a change must result in added value through some form of implementation."
The Internet, itself an innovation model, has generated websites like thinksmart.com, which talks about an "innovation DNA" model where the concepts that build the DNA include culture, change, challenge, customer focus, creativity, communication, collaboration, completion and contemplation. The model is a continuous work in progress and evolves as business is redefined. Another website tracking innovation, innovating.com, describes success factors for innovation as a three-legged stool kept upright by leadership, culture and process; lose one leg and the stool topples over.
There are 896 sites on Yahoo about innovation and an innovation festival in Norway. But does any of this really get down to the "nitty gritty" of what innovation is in the nutraceuticals industry, who the innovators are, why they've been successful and most importantly, how they'll maintain an edge in an increasingly challenging market? These topics were all considered in the Industry Innovator voting process and discussed by our executive judges.
Dondeena Bradley, senior program manager in the Global Nutrition & Health Group at the Campbell Soup Company, Camden, NJ, questioned the definition of innovation versus execution. "It may be a great idea, but can you execute it?" she said. "Or, can you put a new spin on an old idea? Where is the sustainable value?"
Others also challenged whether our industry is too new to really have a track record of innovation and at least one executive believed that there is no truly innovative work being done. "You can make product that really does move the needle, but so few are going down that path," said Bob Jones, managing director of consulting firm Functional Foods LLC., Cambridge, MA. "They don't want to take the risk or they're not sure how. Consumer demand has outstripped our ability or willingness to provide innovative solutions."
According to Anthony Almada, president of Imaginutrition, Aptos, CA, "Companies that are innovative are taking a different tack. Gone are the days that ingredient companies are coming in with a new ingredient simply because it's new. And true innovation at the dietary supplement end product level is extremely rare. Now there are consumer driven requirements; we need to meet their needs and have efficacy and safety. Also education must be married to innovation; we need to deliver products easily embraced by the consumer."
"Real innovation finds the gap between what consumers want and a way to deliver it," said Paul Paslaski, senior marketing manager at Roche Vitamins, Parsippany, NJ. "You have to balance consumer appeal versus disease fighting properties and you have to deliver a mainstream opportunity. These products need to be part of the everyday routine, not a blue moon product."
Our Industry Innovators Defined
The call to be innovative is a challenge responded to differently by different companies, if our Industry Innovators are any reflection on the industry. These companies include large and small manufacturers, from both the functional food/beverage and dietary supplement industries. They include a pharmaceutical company, a small biotech, two large mainstream food manufacturers, two smaller food manufacturers (one of whom also supplies ingredients), an MLM supplier, an ingredient supplier, an ingredient and retail product supplier and a unique meal preparation company for special needs populations. Table 1 details this year's Industry Innovators in alphabetical order.
While there are vast differences in these companies, there were also some interesting similarities that surfaced during our research. The vast majority, if not all, of the companies have patented or proprietary products. Investments in research are common; these companies have learned that you have to spend money to make money and they are investing in science to back up their products and protect their positioning in the market.
The group is a mix of public and private companies, but across the board growth seems to be above average, whether there are individual stockholders to be satisfied or an investment banking firm looking over the CEO's shoulder.
Interestingly, several companies, Galagen and AMBI in particular, started out as pharmaceutical or biotech companies before switching to a nutritional focus. And almost every company mentioned following "a pharmaceutical model" or using pharmaceutical standards to bring their products to the market on a higher playing field than the competition. Also, both Galileo Laboratories and AMBI have pharmaceutical as well as nutraceutical products and are pursuing parallel paths to market.
Partnerships are another area of consensus among our innovators, with all seeking alliances that would continue to expand current business. Indeed, this is one company's modus operandi-Galileo Laboratories reportedly has 10 partnerships pending. Acquisitions or mergers that make sense in terms of broadening product lines (AMBI), distribution channels (General Mills), delivery forms (Galagen) or new product categories (Quaker's Altus venture) abound. Most executives predict consolidation in the future; they are helping achieve that with current and future strategies.
Another key for these innovators is the health care professional, a recent focus toward which many of these companies have turned. Beyond the much-publicized Benecol switch in strategy and Menu Direct's indepth work with pediatricians and endocrinologists-which makes a lot of sense considering its very specific product lines-Omega Tech has also forged several alliances to help get its message to health care providers and Pharmanex recently formed a whole new medical division to address health care providers. Both McNeil and Pharmanex, in describing doctors' response to their products, said, "They get it."
Looking at the big picture, these companies are unanimous in their emphasis on consumer solutions, not products. Most, even smaller companies, are also focusing on mainstream opportunities rather than niche markets.
A Word About Our Methods
This Industry Innovators article is the result of months of research and discussions throughout the industry. Key executives were polled about those companies that were "pushing the envelope" in some facet of nutraceuticals; a questionnaire was then sent out to determine who the top 10 innovative companies in the business were. We believe the international segment of the industry is not equally represented in these rankings, which we hope to remedy in the future. We also hope to include a "Companies to Watch" section, as there were many smaller companies doing innovative work that simply did not find a place in our top 10. We plan to make this an annual feature and encourage feedback from the industry. A special thanks to our editorial advisory board and all the other key executives who made this article possible.
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