As dietary supplement suppliers begin preparations for the new fall season, there have been some interesting developments influencing the direction of the market. As in the U.S., the Canadian supplement market has been flat for the last 12-18 months with some growth but at a much reduced rate. Dynamics that have influenced the shifting market in Canada include a vigorous entrance by Rexall-Sundown and some strategic shifts, including Leiner/Vita-Health's purchase of Stanley Pharmaceutical and the acquisition of Wampole by Pharmex Industries.
In terms of the Leiner acquisition, the company's aggressive entrance into the Canadian contract manufacturing market-first purchasing Vita Health and then Stanley-has generated within the large mass marketers an increased presence of "private label" or house brands. Vita Health and Stanley have both been major players in the contract manufacturing of OTC drugs and this has always included vitamins, minerals and, more recently, botanicals. Their ownership by Leiner has brought a marketing campaign that is showing pharmacy and grocery mass marketers the benefits and profits associated with house brands. Today virtually every chain of pharmacy and grocery stores with more than 30 outlets has its own house brand of dietary supplements.
The C.E. Jamieson brand of dietary supplements has dominated the mainstream or mass market in Canada for many years and is still the largest Canadian brand with sales in excess of Cdn.$100 million annually. However, it is experiencing new pressure from house brands, as well as an increased presence in mass market by such companies as Quest/Boehringer Ingelheim, Swiss Herbal, Webber Naturals (a mainstream brand by the popular health food manufacturer Natural Factors), NatureMade, Holista and Rexall/Sundown. Shelf space for supplements is in high demand but very little is being done to build consumer confidence and awareness and seek out new customers for these products.
Exactly how Pharmex's purchase of Wampole will affect overall presence in the market is not clear since the sale has only recently been completed, but Wampole, with sales estimated to be about $20 million, has had a long historical presence in pharmacies throughout Canada with its OTC line. Although not considered a major player, it has recently increased its share in the herbal supplement business. With an infusion of capital, new management and the recent addition of two key persons from Webber, Wampole is poised for growth.
Health Food Stores Taking A Hit
The health food market has been seriously impacted by the increased presence of many dietary supplement brands into mass market pharmacy and grocery stores. Many of the larger chain pharmacies and grocery stores have initiated the "store within a store" concept for traditional health food items. This concept has been only moderately successful but it is now possible in most of the larger cities in Canada to go to a grocery or pharmacy outlet and shop, in a special area, for virtually all the same brands that would have been found only in health food stores. This, combined with the rapid expansion of house brands and other lines of dietary supplements, has turned most of the more popular products into commodities for which consumers are now shopping based on the best price as well as availability.
Health food store margins have also been eroded by the lower margin that mass tends to take on their products. Some stores have attempted to address the issue by simply refusing to stock products and lines that are available in the mass outlets but most, recognizing that losing margin is probably better than losing the sale, have simply had to content themselves with these lower margins.
Although there have been very few failures reported in the retail natural food stores, there has been serious concern expressed about the future of many of these stores. The larger chains and franchise stores have taken the last 12-24 months to reconsolidate and very few new stores have been opened recently.
The Regulatory Environment
Canada is in the process of developing a separate category for dietary supplements. The Office of Natural Health Products (ONHP) will regulate Natural Health Products (NHP's). NHP's will be what are commonly known as dietary supplements and will include vitamins, minerals, botanicals and most common nutrients in dosage form. The new category will look much like a "low risk" OTC product. Products, fabricators, distributors and/or importers will be registered and products will be expected to meet GMP standards.
The Director of the ONHP, Phil Waddington, N.D., is a naturopathic physician and should bring to the office a good understanding of botanical and natural medicine. This issue-a basic inability to understand this sector-has historically been a problem with Health Canada. Over the past few decades, most of these products, as they became popular, migrated into the OTC drug category by default. Vitamins and minerals have long been manufactured to meet the OTC scientifically-based standards of evidence and little is likely to change as NHP's except for the likelihood of expanded claims. Unfortunately botanicals with multiple actives and homepathics do not necessarily conform to these requirements. The presence of a ND with an understanding of herbal medicine should be very helpful in understanding and developing regulations that recognize the difference between whole plant tinctures and standardized extracts and how to ascribe health claims to these products.
In the meantime the current Food and Drug Act and Regulations apply, although the government has had an unofficial hands-off policy during this transition time. Some industry insiders say that this relaxed attitude has allowed a higher than usual amount of substandard product onto the market. And clearly a wider range of health claims are being attached to products and tolerated in the marketplace than probably would have been tolerated by Health Canada in years past.
In conclusion, the market is expected to continue to grow but not at the historic rates of years past. Raw material suppliers and manufacturers have observed filling order books as distributors start ramping up for the new season. Despite some of the negative press articles about dietary supplements published recently, consumer interest remains high in alternatives to drug-based medicine. A majority of Canadians now report using some type of dietary supplement on a regular basis and, although they are asking hard questions about the quality of the efficacy of many products, particularly botanicals, the interest is expected to continue and create increased demand.
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