The following article is excerpted from a report "Survival Strategies in Consumer Health Care, The Nutraceuticals Explosion," a comprehensive overview of the worldwide nutraceuticals market, published by Nicholas Hall & Company, Southend-on-Sea, U.K. It is reprinted with permission.

The market for herbal supplements varies greatly around the world, with consumer awareness and acceptance, delivery forms, availability of products and regional regulations playing a role in influencing the growth of the market. What follows is an overview of the market for herbals in Western Europe and in Japan.

Western Europe
As an overview, the market is well developed but has seen little overall growth in the late 1990's. Sales have been boosted by brands tailored to meet specific consumer needs, but inhibited by ongoing prescription sales in some countries. In addition, concern exists over the possible tightening of regulations.

In Western Europe, four individual countries-Germany, U.K., France and Italy-account for more than three quarters of regional sales. In stark contrast to the herbal and natural supplements market in the U.S., the market in Western Europe has remained static in the late 1990's (Table 1). Not only has growth been limited to only a few percentage points, but shares taken by individual supplements have, with a few notable exceptions, remained unaltered. Key elements of the market include:

-Ginkgo biloba sales have risen from $52 million to almost $80 million. However, the supplement holds a dual positioning in Europe and a very high proportion of use is for the relief of specific circulatory problems, in particular varicose veins.

-Echinacea has emerged as a popular immunostimulant, generating sales valued at an estimated $70 million.

-St. John's Wort has been established as an OTC supplement while also generating significant sales on prescription. As a consequence, over-the-counter sales are much lower than in the U.S.

-Seventy percent of garlic supplement sales in Western Europe are generated in Germany.

-Tonics, often with herbal and natural ingredients, remain popular in many European countries, although sales have been affected by the growth of multivitamins. In addition, herbal teas have retained their traditional strength in countries such as Germany, Austria and Switzerland and have also attracted new consumers in countries such as the U.K.


A Regional Overview
Germany. There is a very strong tradition of herbal medicines and supplements in Germany, with sales of $225 million in 1998, 32% of all OTC vitamin, mineral and supplement sales. Herbals in single dose form (tablet or capsule) must be registered and herbal remedies are regularly prescribed by some 80% of GP's. However, at the end of the 1990's the change in patient copayment has resulted in herbal marketers becoming more reliant on the self-medication market. Herbal supplements are available in pharmacies and mass market outlets as well as some products available in non-pharmacy outlets. However, the emergence of extensive low price private label ranges in 1998 has resulted in increased competition; such developments helped to limit growth to just 5% between 1995-98. Meanwhile, some former pharmacy-only brands that have been extended into the mass market have met with hostility from pharmacists.

Garlic (29% of the total) and echinacea (26%) are the most popular supplements. However, the apparently small share of sales held by St. John's Wort (5%) conceals significant sales of Rx antidepressants formulated with the ingredient.

U.K. Despite a peak of $162 million in 1996, herbal and natural supplement sales have subsequently fallen; category value in 1998 ($157 million) was only 1% higher than in 1995, in part depressed by the strength of private label supplements. However, the pattern of sales is changing. Long-established supplements such as fish oils (which represent half of all herbal and natural supplement sales) and garlic have seen sales fall, while some recent arrivals have grown rapidly, often boosted by intense consumer interest. Although supplements that ultimately fail to live up to consumer expectations decline as rapidly as they increased, others-such as ginseng and ginkgo biloba-have enjoyed a more sustainable rise in popularity, although there is still strong growth potential.

France. Herbal products have a strong heritage in France and are widely accepted by the health profession. French herbal companies, meanwhile, have had a major influence on the market in Western Europe and beyond. Herbal and natural supplements generated OTC sales of $96 million in 1998. However, there has been little overall growth in the second half of the 1990's, with sales increasing only 5% since 1995. Sales are, in general, limited to pharmacies, with forays into the mass market under challenge. Qualified herbalists, however, may supply certain herbal products. Ginkgo biloba is the leading supplement by a wide margin and owes its popularity to positioning for circulatory problems such as varicose veins. Other popular herbal ingredients include ginseng, St. John's Wort and immunostimulants such as echinacea.

Italy. The market has a value of $66 million and sales are stable. There was no overall growth in 1998. Unlike in other leading Western European markets, the most popular supplements in Italy are lecithin and royal jelly; ginseng and fish oils have smaller sales, while garlic has only a limited presence.


For The Future
Overall the herbals and natural supplements market in Western Europe will continue to grow more slowly than that in the US., with prescription sales in many countries-and the need to register single dose forms (tablets or capsules) in Germany-inhibiting OTC growth.

Media attention, good and bad, will increasingly become a significant factor in generating consumer interest and will help to establish new ingredients. The development of supplements targeting specific consumer groups will accelerate, with marketers expected to capitalize on the aging baby boomer market.

Scientific studies and clinical trials to support claims of efficacy are already critical factors in the long term success of herbal and natural brands in Western European markets such as Germany and France. Wherever possible, marketers will promote the existence of such studies to support unregistered herbal supplements. Similarly, the use of standardized extracts as a guarantee of quality and reliability will become a key element in brand building.

The trend toward combining two or more ingredients for added benefits-a key feature in the U.S.-has not really impacted the European market, but it will come.

Major companies, including those with an Rx or OTC perspective, will become dominant players based on their ability to conduct clinical studies and to invest in A&P.


The Japanese Market
As an overview, the market remains severely undeveloped in comparison with the U.S. and Western Europe. Deregulation in 1998 has raised growth prospects, however, and there is considerable potential for foreign herbals players as well as domestic marketers. The arrival of multinational brands (under license) has been one of the early growth drivers.

The herbal supplements market in Japan has a shape very different than that in many other countries. Although traditional medicines (kanpo) and herbal teas enjoy considerable popularity, the development of a significant herbals sector has been hindered by a combination of factors:

-the dominance of liquid tonics (bottled nutritive drinks and mini drinks)
-the popularity of functional foods
-a ban until 1998 on the sale of many herbals in drug-like dosage forms such as tablets or capsules.

As a consequence, Western style herbal and natural supplements have not played a major role in Japan (Table 2). However, the market is beginning to open up following regulatory changes in 1998 and both U.S. and Japanese marketers are capitalizing on new opportunities.

As the herbals market began its dramatic growth in countries such as the U.S. in the 1990's, Japan came under increasing pressure from foreign governments and companies. In particular, the U.S. requested that distribution agreements for herbals in Japan should follow its own pattern, with herbals registered as foods and permitted to be sold in tablet or capsule form. In response, the Ministry of Health & Welfare established the Herb Study Group to review 145 herbals, including ten (American ginseng, echinacea, goldenseal, St. John's Wort, blessed thistle, evening primrose oil, pau d'arco, cat's claw, ginkgo biloba and saw palmetto) specifically requested by the U.S.

Following investigation, in mid-1998 the Herb Study Group concluded about these ten herbs that-with the exception of goldenseal (which has been classified exclusively as a drug), cat's claw and pau d'arco (on which decisions were deferred pending submission of data)-the herbs could be regulated as foods and sold in drug-like dosage forms, although they are classified as drugs in certain sections of the drug classification criteria. However, such products must be clearly labeled as foods and must not carry any therapeutic indications. Of the total 145 ingredients, 60 can be regulated as foods and sold in drug-like dosage forms, a further 18 are regulated as drugs and the rest require additional investigation.

According to industry sources, the most popular herbal and natural supplements include royal jelly and propolis, blueberry and ginkgo biloba, with saw palmetto supplements introduced by several marketers in 1999-2000. Ginseng is generally marketed in liquid form.


For The Future
Deregulation in 1998 has opened up the market and new herbal supplement ranges are expected in the next one to two years. Joint ventures and marketing agreements will result in the introduction of supplements from U.S. and European players, with many Japanese companies preferring to manufacture under license rather than develop their own ranges.

Further deregulation of additional ingredients will offer even greater opportunities for growth and the Ministry of Health & Welfare is expected to continue its process of liberalization.

The burden of health care expenditure, coupled with an aging population, provide strong incentives for the Japanese government to encourage the population to maintain health by means of supplementation as well as healthy diets.

Niche products-targeting a specific disorder or to benefit an identified consumer group-are likely to be the means of developing the market.

Direct marketers already enjoy a high level of penetration in Japan and it is predicted that many herbal and natural supplements will be sold direct, either by means of network marketing or by mail order.

It should be noted that many herbal and natural ingredients are already incorporated in functional foods rather than marketed as supplements. In addition, the continuing popularity of tonic drinks will act as a bar to growth. As a consequence, the supplements market is unlikely ever to achieve the dramatic expansion experienced in the U.S.

About the author: Nicholas Hall & Co specializes in providing companies worldwide with strategic information on the international self-medication market. For more information, contact Scot Nisbet, marketing manager at 44-1702-220-200; nhcgmktg@aol.com, or in the U.S., contact Elizabeth Beezer, regional vice president, 215-402-0344; ebeezernhc@aol.com.