Some are now declaring nutraceuticals to be waning. One headline suggested the industry was stalling. I suppose that provides interesting reading and powerful headlines. It's a bit like those that are pulling money out of stocks to prepare for the current economic downturn. There is nothing that suggests the sky is falling but the "Chicken Little" approach always gets attention.

Meanwhile, major players in the food and supplements business as well as smart entrepreneurs are making moves that suggest they are in for the long haul. FDA recently approved a health claim for the plant esters that are in products such as "Benecol." If McNeil can't make a business out of that (although I'm sure they will), then shame on them. Soy product sales have increased substantially since the approval of a health claim and as old-timers say, "you ain't seen nothin' yet."

There are business trends and business fads. Nutraceuticals follow a trend that is here to stay. Yet there are also charlatans who try to take advantage of every opportunity and sometimes spoil it; let's hope they're not spoiling this one. I believe the Center for Science in the Public Interest was correct this summer when it tried to blow the whistle on firms that add low levels of herbals and other ingredients-such as a bit of ginkgo sprayed on potato chips-just to take advantage of the trend. Whose health will benefit? No one's. Who might suffer? The industry for getting bad press. Yet, sadly, these represent only fragments of industry.

The real news is the major food firms-from Unilever to Danone to Kraft-taking positions in natural products, health and nutraceuticals. The news is in the $1.8 billion reportedly paid for Rexall Sundown in May. The news is in the continued interest of three major global villages–the U.S., E.U. and Japan-showing strong support for healthful products and ingredients that assist them in a more healthful life.

So what are we watching? We need to watch how McNeil handles both Benecol and "Aflexa"-and let's not forget "Healthy Woman." This firm, which concentrated on "Tylenol" for years, with products like "Lactaid" on the side, has made major leaps into the health supplement/healthy foods business. This firm showed it could take the adulteration of Tylenol bottles in the 1980's and arise with one of the strongest brands in the U.S. Other firms might have withered. McNeil is a long-haul player.

Clearly, we'll continue to watch the ten firms named in our April issue as Industry Innovators: AMBI, GalaGen, Galileo Labs, General Mills, McNeil, Menu Direct, Omega Tech, Pharmanex, Quaker Oats and Stonyfield Farms. There is no evidence that any of these firms are backing off of their commitment. We also need to watch firms like Numico in the supplement business. Numico has demonstrated initiative and assertiveness. With the money invested it is not likely it will back down. Likewise, Pharmanex has not backed down in its fight against FDA regarding the regulation of "Cholestin." It announced this summer that it will seek 500,000 distributors and that it is a $308 million dollar firm.

We need only to follow GalaGen for a profile of a firm that is clearly committed to nutraceuticals. It has arisen from a pharmaceutical background to a position of leadership in functional foods. It has formed partnerships with major firms in both the pharmaceutical and foods business. This includes major players like Novartis and Tropicana, Hormel and GNC, as well as smaller firms looking to improve their position. It has developed clear branding and is clearly focused on key technologies and substances.

Last issue we discussed Tropicana and Yakult. Don't suggest to either of those firms that nutraceuticals are declining. Both are making sales and profits and innovating with nutraceutical products. What about Quaker? It did a joint venture with Novartis called Altus Foods and is currently working on the first product in­troductions. But Quaker itself this year launched "Propel" fitness water with six vitamins and "Torq" energy drink with vitamins B-6, B-12 , niacin and pantothenic acid for energy and vitamins A, C and E as antioxidants. This is hardly resting on your laurels. Quaker probably sells more oats as a potential cholesterol control agent than as a good-tasting breakfast meal, or perhaps mostly as both. AMBI partnered with American Home Products to launch "Cardia" health salt. The company also plans to launch a soy-based protein bar later this year.

The real food giants like Danone and Nestlé have shown involvement by being major producers of bottled water–the most natural and basic nutraceutical of all, although we don't think of it that way-and by launching "Actimel" and "LC1" respectively. In addition, with Nestlé's purchase of PowerBar it now has a whole stable of functional athletic products including a sports drink, "PowerBar Perform," a carbohydrate load gel and a bar with herbals, to list a few. This gives the firm a major platform.

Additionally, we can recognize Mead Johnson Nutritionals' "Viactiv"; whose soft calcium chews have made a niche in the market. We won't forget Ocean Spray with Cranberry Juice Cocktail Plus, adding calcium along with vitamins C, A and E. Firms from Campbell's to Kellogg may have had market withdrawals but they've stayed in touch with the marketplace and bought or launched other healthy products with nutraceutical ingredients.

So, what is the lesson? While some smaller firms may try to dupe the public by spraying minimal amounts of ginkgo on chips, this does not represent the broad array of firms that are clearly entrenched in the nutraceuticals business and yielding benefits. What is a common theme among those making headway? Perhaps most common is to choose an ingredient that consumers have already heard of and use product publicity as a major part of the overall marketing campaign. It appears that when positive press is combined with attractive packaging and promotion, the consumer that is fueling this business responds. Fooling the consumer is no better than fooling Mother Nature. Providing beneficial products with truthful statements of benefit gives consumers what they are looking for. After all, that is what real marketing is all about! Cheers to the marketers that are benefiting from nutraceuticals.

NW

Greg Kitzmiller is a marketing faculty member at Indiana University's Kelley School of Business, Bloomington, IN. He is also co-director of the Global Business Information Network (GBIN) at the Kelley School of Business. He combines international and domestic strategic and marketing management experience with university teaching, professional speaking, executive education and consulting. Mr. Kitzmiller can be reached at 1309 East Tenth St., Bloomington, IN 46405-1701; 812-855-1004; Fax: 812-855-6440; E-mail: gkitzmil@indiana.edu.