2004 should be looked at as a positive year for this industry. We witnessed a more active FDA and FTC, as well as the banding together of many of the industry associations for the common good. At last, instead of talking about cleaning up this industry, it is finally happening. "Andro" was effectively removed from the market and ephedra is now no more than an afterthought. In addition, the long awaited GMPs just might reveal themselves before the close of the year-and even better, it is said the industry will be pleased with the final result. Also on the table is FDA's new implementation and enforcement stragtegy for DSHEA and adverse event reporting (AERs). These issues will hopefully be resolved in the coming year, which will help further bolster this industry's reputation as one that deserves to be recognized as a major player in improving the lives of consumers.

What follows are comments from industry executives regarding the state of the industry in 2004 and what they feel the next year will bring.

"The industry experienced two trends in 2004 that continue to drive product development and direction for 2005. First, obesity emerged as the 'hot potato' headline and policy issue. Many companies re­sponded with changes including lower sugar, lower carb, smaller packages, larger reported serving sizes, and in one case, reformulation to include whole grains. 2005 will witness the utilization of functional products for satiety, fat fighting and fulfillment. Pro­duct development from in­gredient suppliers will provide the next generation of obesity products. The second trend, the evolution of the final format for qualified health claims, witnessed the approval of new claims for nuts and fish oils, and set the groundwork for additional petitions for functional obesity products in 2005."

Nancy Childs
Professor of Food Marketing
St. Joseph's University
Philadelphia, PA
"I have some concern over the last few articles I've seen discussing the lack of health benefits from antioxidants and the possible contribution of gluco­samine toward accelerating the onset of diabetes. People are taking nutraceuticals for their perceived health benefits and we may be seeing evidence that some of these products are not as inherently safe or efficacious as presumed. Natural is not a guarantee of safety or efficacy. We should be reminded that these compounds are biologically active and therefore can trigger similar, un­wanted biological responses as seen with drugs."

Richard Barndt
Director, Product Assurance &
Regulatory Affairs
National Starch
Bridgewater, NJ


"The upcoming 12 months will be interesting as you look at developments in both the nutraceutical and pharmaceutical industries, along with the potential impact in one industry based on events in the other. For example, there is al­ready strong interest in the bone and joint benefits from nutraceuticals. Now consider the October 2004 removal of Vioxx®, the leading arthritis drug that sold over $2.5 billion worldwide in 2003. If the Vioxx removal leads to removal of similar drugs in the Vioxx class, a class selling nearly $6 billion in 2003, then the effect should be felt in the nutra­ceutical industry as consum­ers seek more natural remedies for bone and joint health. Even without ad­­ditional re­movals, the Vi­oxx® situation alone reminds everyone that the sophisticated medicinal chemistry creating pharmaceuticals will sometimes re­sult in unintended effects. The nutraceutical industry must plan to capture any drift away from pharmaceuticals with quality nutraceuticals that are known to be safe and effective."

David Griffith
President
Sparkiting Solutions, LLC
San Antonio, TX


"While turbulent for the nutraceuticals industry, 2004 has been a year of resolution. Ephedra and 'andro' are off the table, GMPs are just around the corner, AERs are in the final stage of development and there seems to be progress on Prop 65 compliance in California.
"The opportunity now exists in 2005 to finally show the world not only that we are a 'regulated' industry but, most critically, a self-regulated industry. Specifically, raw material costs (for botanical ex­tracts in particular) must be rationalized, flagrant claims for easy weight loss and body part augmentation must be driven from the market and a much more even playing field established for all competitors in the nutraceutical supply chain.
"The X factor will likely be continued exposés on such things as herb/drug interactions and other safety scares, which will continue to undermine public confidence in our products. It is simply bad judgment and bad business to allow concerns of safety, quality and efficacy to remain in the minds of the government, the media and our consumers."

Loren Israelsen
President
LDI Group
&
Executive Director
Utah Natural Products Alliance (UNPA)
Salt Lake City, UT


"The Japanese economy is continuing to strengthen and appears to have finally escaped from the more than decade-long malaise that affected most of the country. Japanese companies are starting to reverse the 'hollowing out' process, with gains in new plant capital spending in Japan for the first time in years. This positive outlook should have an impact on the functional food and nutraceutical markets as well, encouraging continued growth in the health-related foods and dietary supplements markets. Both FOSHU (Foods for Specified Health Uses) and non-FOSHU functional food new product introductions are strong, with the encouragement of the Japanese government. Next year revised FOSHU regulations are expected, focused on health claims for foods and dietary supplements. The more than $5 billion FOSHU market is expected to grow again next year, supported by Japanese consumers interested in maintaining their health through preventive non-drug measures."

Ron Bailey
President
California Functional Foods
Ashland, OR


"The herbal products segment is in a new growth phase again in Europe after some years of turbulence. The acceptance in the population is growing, with growth rates between 6 and 8% for products outside the pharmacies and without drug status. Importation of herbal material into Europe is also rising, and more medicinal plants are being cultivated in Europe."

Dr. Joerg Gruenwald
President
Phytopharm Research & Consulting
units of analyze & realize ag
Berlin, Germany


"As we have seen with each passing year, both interest in product quality and product quality itself has im­proved. Ever increasing public and governmental scrutiny along with the forthcoming GMPs can leave no doubt that product quality is a key element not only for success, but for mere survival. And the only way to insure this is by testing.
"This has also focused attention on the 'quality' of the quality testing itself. No longer is a piece of paper (usually in the form of a certificate of analysis) sufficient; it's what is behind that certificate that counts. Companies must be able to support their product quality claims, and that requires the support of the testing laboratory, whether it be in-house or outside. Companies would do well to test their testing labs before an analysis becomes the focus of serious scrutiny."

Robert Green
President
Integrated Biomolecule Corporation/
IBC Labs
Tucson, AZ


"The changing perspective of dietary fiber has been dramatic. Over the last 18 months, it was a driver behind lowering the 'net' carb count of 'low carb' foods. More recently, fiber is a primary focus of public health authorities, with the Dietary Guidelines Committee citing fiber as one of only seven 'nutrients of concern.' The wealth of fiber's health benefits apply directly to today's biggest concerns: obesity, diabetes, heart disease and cancer. However, different fibers deliver different benefits. We will see a much greater differentiation between fibers and resistant starches in 2005 as the functional bakery segment evolves with 'better-for-you' and reduced gly­cemic carbohydrates."

Rhonda Witwer
Business Development Manager,
Nutrition
National Starch
Bridgewater, NJ


"We see two interesting trends: a spike in development efforts of new functional foods and a push for quality across all segments of the nutraceuticals industry. If you spoke with anyone in the food aisles of Expo East, the real exciting news was what was coming through the pipeline rather than the products they were already selling. There are a whole slew of foods coming out targeted at specific health conditions like cholesterol management, immunity and even brain health. As for quality, it seems many of the supplement manufacturers are afraid of the FDA now and have decided to err on the side of caution. They are shifting from the cheapest suppliers to those with the best quality and consistency to ensure their products will work for consumers and keep them out of the spotlight. It is a great time to be in the space, as we believe this new focus could spur new growth into the market globally."

Adam Ismail
Business Development Analyst
Cargill Health & Food Technologies
Minneapolis, MN
&
Paul Paslaski
Market Development Director
Cargill Health & Food Technologies
Minneapolis, MN


"We see much of the industry continuing to transition into science-based, efficacious formulas. Yet, some mass market outlets dictate cost over efficacious formulas, thereby creating a polarizing impact on the entire supply chain. Finished goods manufacturers are being forced to choose between quality and price, and analytical standards are also still absent for several key ingredients. As a result, stronger alliances are being forged between manufacturers and raw material suppliers that recognize the importance of delivering science-based applications, standardized analytical methodologies and pharmaceutical-level audit procedures. There remain tremendous opportunities for companies willing to commit to producing the best possible products for consumers."

Barry Titlow
CEO
Compound Solutions, Inc.
Escondido, CA


"The last year saw unprecedented regulatory and legislative action with regard to dietary supplements. Bans on two of the in­dustry's most controversial products-'andro' and e­phedra-took ef­fect. And while DSHEA survived without be­ing a­mended-thanks in large part to stepped up grassroots and ad­vocacy efforts-I expect our industry's most zealous critics will renew their challenge to this law with a vengeance in the 109th Congress. Look for two topics to dominate the dietary supplement debate in the next year: mandatory adverse event reporting (AERs) and pre-market approval."

David Seckman
Executive Director & CEO
National Nutritional Foods
Association (NNFA)
Washington, D.C.


"Dramatically increasing healthcare costs are expected to continue in the U.S. This will lead to greater support of preventive health measures by U.S. government bodies and insurance corporations. Furthermore, the U.S. population continues to age rapidly, as baby boomers reach their late 50's and comprise the largest consumer segment. This segment of the population appears to be more willing to manage their own health needs and invest in preventative measures. Products must still, however, prove to be convenient to this market segment.
"Science is critical to successful supplement marketing. This has become increasingly important in the wake of negative media reports pertaining to some supplement items. Consumers desire functionality and proven health benefits, in combination with being natural. Nutraceutical manufacturers will need to gain consumer confidence with proof of efficacy and safety for their products.
"Increasing pressure from various regulatory bodies is anticipated and will focus on claims and quality levels in the nutritional supplement industry. Additionally, consumer 'watchdog' groups are also increasing their scrutiny of supplements currently on the market.
"Regional regulations are expected to become a greater issue for U.S. manufacturers, as they will increasingly need to formulate products in adherence to global requirements. In addition, 'allergen-free' and 'all-natural' will continue to be in demand and require further definition."

Margot Connor
Vice President of Sales,
Human Health & Nutrition
Chr. Hansen
Milwaukee, WI


"2004 was a very positive year. Revenue growth, industry-wide stability, a greater focus on product quality and integrity and a willingness to actively address the key issues that have plagued our industry over the past several years give us good reason to be enthusiastic about the year just passed and optimistic a­bout the year a­head. In terms of the omega 3 sector in which we participate, 2004 was another banner year producing high double-digit growth, led by huge growth in sales of the high concentrate (50% or greater EPA & DHA) omega 3 products. With the constant flow of new scientific support for, and the FDA's endorsement of, the health benefits of this essential nutrient, solid growth in the supplement category will likely continue through 2005 and beyond. In addition, 2005 will see omega 3s make the transition from supplements to functional foods, as new technologies facilitate the delivery of EPA and DHA omega 3s into a variety of traditional food products in a number of different categories, including bread and dairy."

Robert Orr
President & CEO
Ocean Nutrition Canada
Dartmouth, Nova Scotia, Canada


"New FDA initiatives to begin to fully enforce DSHEA are constructive for the industry. In 2005, final rules for GMPs will require all manufacturers to comply within three years. New initiatives will include enforcement of the new dietary ingredients (NDIs) provision where sellers failed to pre-notify FDA of the introduction of NDIs within 75 days, as required. FDA will review dietary supplement (DS) labels to ensure that documented risks and appropriate safety precautions are adequately disclosed. FDA will also evaluate structure/function claims, and some claims in the market will probably not stand. Consumers will have more confidence in DS products, and the media and Congress will no longer be able to claim that the industry is unregulated."

Mark Blumenthal
Founder & Executive Director
American Botanical Council
&
Editor
HerbalGram
Austin, TX


"Throughout 2004, the trend of marketing food and beverage products to health conscious consumers has dramatically grown. Manufacturers have also started expanding their healthier product offerings to reach a broader audience. GTC Nutrition believes this trend will continue and that all consumers will be able to find healthier alternatives. Our company is committed to providing manufacturers with specialty ingredients that promote health by reinforcing immunity, maintaining weight and much more. In working with companies like ours, manufacturers will not only produce healthier products, but will also be able to communicate the health benefits associated with these products, so consumers can make more meaningful purchase decisions."

Jim Low
General Manager
GTC Nutrition
Golden, CO


"I feel a positive swing in the momentum occurring in the nutraceuticals industry. Following several years of negative press and its impact on our sales and industry reputation, our persistence and adherence to a lifestyle we are determined to protect for all hu­man beings is be­ginning to take root again.
"Unigen Pharmaceuticals continues to provide the research and supporting science that will br­ing long lasting credibility to this important industry. The products it develops and licenses to its partners are developed using pharmaceutical grade techniques supported by genomics and human clinical trials to establish safety and efficacy."

Derek Hall
President & CEO
Unigen Pharmaceuticals
Lacey, WA


"For Kemin's FloraGLO® lutein enterprise, the nutritional supplement marketplace has given us a strong year and continues to show great promise. Be­sides the increasing demand picture for lutein, one important indicator of our business vitality is how professionals outside of the supplement industry view us.
"The dietitian and the optometric communities, this year more so than in previous years, have shown a much greater acceptance in the concept of supplementation to address chronic conditions involving eye health and now skin health. The key to maintaining this trend is not too complex: remain close to and communicate the growing science supporting the molecule, while focusing on quality and safety."

Rodney Ausich, PhD
President
Kemin Foods
Des Moines, IA


"The nutraceutical industry has continued to evolve away from being ingredient driven and more toward being brand and benefit driven. There hasn't been a 'generic' cash cow like St. John's Wort in ages, and there doesn't appear to be one in sight. We view this as a sign of maturation, as this industry has finally come to realize what other major industries have known for years.
"With respect to regulatory issues, while in some quarters the impending dietary supplement GMPs are viewed as an obstacle, reputable manufacturers that have heavily invested in their quality systems for years are eager to have their efforts validated."

Terry Coyle
Vice President, Regulatory Affairs
Garden State Nutritionals
West Caldwell, NJ
"The 'Health and Wellness' industry continues to evolve and hold much excitement. Almost daily, research identifies new bioactive materials that can effectively improve health and well-being. Genomics opens many new doors for the food and pharmaceutical industries, as we move one step closer to preventative medicine and in­creased life expectancy. Food manufacturers are re-thinking their long-term development efforts in order to meet consumer de­mands for responsible nutrition in both retail and food service. In 2005, we will see more foods and beverages with bioactive materials such as omega 3's, CLA, DHA, lutein, lycopene, and other antioxidants, in addition to vitamins, minerals and fiber. There will be more foods and beverages with higher protein and moderate carbohydrate levels for meal replacements and snacks, as the busy consumer attempts to improve nutritional habits. Our technical staff has worked diligently all year to build and expand our masking flavor lines and our VidaPro™ family of flavors in order to make these healthy foods and beverages taste as good or better than any other product on the market."

Maureen Draganchuk
Vice President of Business Development
Virginia Dare
Brooklyn, NY
"I am encouraged that there is a growing number of consumers who incorporate dietary supplements into their lives, valuing the important role these products play in promoting good health. Our industry has taken numerous steps to encourage the regulatory agencies to protect consumers by reigning in renegade manufacturers. In combination with those efforts, we need to vigorously spotlight the ac­tions taken by responsible companies to produce high quality, safe and beneficial products. We must also step outside our industry and find new allies who believe with us that the scientifically supported benefits of dietary supplements make these products an accepted core component of healthy lifestyle choices."

Annette Dickinson, PhD
President
Council for Responsible Nutrition (CRN)
Washington, D.C.


"More and more companies are investing in tomorrow's products and performing clinical studies. We have ex­panded AIDP to meet these new challenges, while maintaining excel­lent service. Our director of R&D, Dr. Jennifer Gu, a former Cal-Tech research scientist, brings a solid biomedical research background to our research and technical support group. In addition, AIDP's R&D is focused on research-based, patent-protected product development. We have three recent filings and two clinical trials in progress."

Edward Lee
President
AIDP
City of Industry, CA


"There has been a resurgence of interest in fiber and fiber ingredients coupled with the low carbohydrate trend. Food manufacturers view fiber as a healthy, effective way to reduce the carbohydrate levels in foods naturally. Even though this trend has stabilized and moderated, the demand for fiber will remain strong. Reduced carbohydrate and thus lower glycemic diets are here to stay and are beginning to be recognized by diabetes doctors as healthful diets for controlling blood sugar. In addition, a newly emerging consumer understanding of digestive health and its importance to overall health and wellbeing will continue to fuel market growth."

Kathy Niness
Vice President of Marketing & Sales
Orafti Active Food Ingredients
Malvern, PA


"With baby boomers aging and healthcare costs escalating, the role nutrition plays for enhancing and supporting a 'youthful' quality of life will certainly take center stage. As an industry, we must be proactive in anticipating our future, and continue to raise the quality bar of our products and processes to meet the expectations of users who will depend on our products to sustain good health, including health professionals and policy makers. At Aloecorp, we are preparing for the future by in­stalling cutting-edge technologies at our aloe growing and processing facilities, and sponsoring scientific research to advance the health applications of aloe."

John Rhees
President & CEO
Aloecorp
Lacey, WA


"While the popularity of low-carb diets may decline, a recent scientific review indicates that the focus will shift to food and beverages that deliver satiety, and soy protein is an ingredient that the food and beverage industry is looking toward in order to fill this need. In fact, since 2001, more than 1970 new products containing soy protein as a key ingredient were introduced in North America alone, with 2004 accounting for 548 of them. Globally, the figure soars to 4754 new product introductions containing soy as a key ingredient. Consumers worldwide are not only beginning to recognize the benefits of soy protein in weight management, but also its benefits in bone health and reducing the risk of coronary heart disease and certain types of cancer.
"Backed by 30 years of research, The Solae Company is committed to providing great tasting, healthful and versatile soy protein ingredients that will allow food and beverage companies to capitalize on the opportunities created by these consumer demands and to hopefully mitigate the obesity epidemic."

Greg Paul, PhD
Director, Health and Nutrition
The Solae Company
St. Louis, MO


"Progress has been made this year in a number of proactive initiatives that are absolutely vital to the health of our in­dustry. For ex­ample, FDA's ban on ephedra went in­to effect and, separately, the President signed into law a bill moving steroid hormone precursors out of the dietary supplement category. FDA is taking ac­tions to more fully implement DSHEA. Final GMPs will hopefully have been issued by the time you read this. Further, CRN will seek increased fund­ing from Con­­gress to help the regulatory agency enforce DSHEA. We hope the whole industry will also make this a priority."

Byron Johnson
Chairman
Council for Responsible Nutrition (CRN)
&
Industry Relations Director
Access Business Group/Nutrilite
Ada, MI


"Science supporting the health benefits of nutraceuticals and functional foods continues to be a key driver of this industry with several significant issues arising over the course of the last year. First, food choices and nutrition recommendations will continue to become further individualized to meet consumer needs. Research will evolve from a 'one-size-fits-all' approach to a new paradigm that takes into account the effects of ethnicity, lifestyle and environment (as reflected in the 2005 Dietary Guidelines Advisory Committee Report) and the genetic predisposition to disease (e.g., 'nutritional genomics'). Further, interest in 'bioactive' food components will continue to grow. The Department of Health and Human Services recently solicited public comment on a proposed definition for bioactive food components, emphasizing their importance in optimal health. Finally, the new paradigm for nutraceuticals research will place a greater focus on the synergistic effects of essential or bioactive components that may be as effective as synthetic drugs in reducing risk for chronic disease."

Clare Hasler, PbD, MBA
Executive Director
Robert Mondavi Institute for Wine & Food Science
University of California, Davis
Davis, CA


"The state of the dietary supplement industry is cautiously optimistic. With the pending publication of GMPs from the FDA as mandated under DSHEA promised by the end of this calendar year, the playing field will be dramatically altered. Manufacturing companies in our space will have to meet federally mandated guidelines for product integrity, and I believe this will lead to dramatic consolidation of capacity. Furthermore, with the continued erosion of the value of the U.S. dollar, I believe that the deflationary pricing our industry has experienced over the last decade is history. Demographics are intact, the regulatory environment is be­coming more predictable and capital remains inexpensive for those willing to participate in needed consolidation. All of these components are a recipe for cautious optimism for the next two years."

Mark LeDoux
Chairman & CEO
Natural Alternatives International, Inc.
San Marcos, CA


"During 2004, the 10th anniversary of DSHEA, we witnessed continued attention to the implementation and enforcement of the law. AHPA has taken the lead in addressing manda­tory sub­­mission of serious adverse events and legislation on this matter may be introduced early in the 109th Congress. Renewed attention to implementing the regulations on 'new dietary ingredients' (NDIs) recently surfaced, and we continue to await the final rule on cGMPs for dietary supplements. AHPA has expressed concern about the inaccuracy and tone of some FDA communications about dietary supplements, and about USDA's exclusion of herbal products from the National Organic Program. We will be diligent in communicating with these agencies and will see progress in all of these areas."

Michael McGuffin
President
American Herbal Products Association
Silver Spring, MD


"For RFI Ingredients, 2004 has been a year of change and transition as new product opportunities and market segments have emerged. The greens category in particular has shown tremendous growth, as many companies jump on the greens bandwagon and consumer awareness of the benefits of green foods continues to explode. Additionally, the market for certified organic products remains on a growth curve and with RFI's acquisition of Beyond Organic Ingredients and partnership with CentroFlora, a certified-organic manufacturer in Brazil, this market is an important one for us and one where we feel the potential opportunities remain strong. Finally, on the antioxidant front, the ORAC concept is truly reaching mainstream awareness within the industry (although we still have a long way to go with consumers). With the publication of expanded ORAC information from Tufts scientist Dr. Ronald Prior, the credibility of the method and its value to industry and consumers gets ever stronger and we see manufacturers beginning to embrace this concept in their buying patterns and new product introductions."

Jeffrey Wuagneux
President & CEO
RFI Ingredients
Blauvelt, NY


"2004 was a great year for people talking about food. Most important, the conversations focused on food, nutrition and health. Thank goodness for Atkins and South Beach. The low-carb trend shook up our industry. Now we need to keep perpetuating the positive role food plays in our well-being. In 2005, we will see and hear more about the individual roles our specific genes have on particular diseases. Nutragenomics will start moving to the forefront. Science will emerge, with more explanation as to what we can eat and drink to turn our good genes on and our bad ones off."

Julie Hirsch, PhD
Director, Product Development
WellGen, Inc.
New Brunswick, NJ


"Scientific evidence regarding the role of nutrients in the prevention of various diseases is emerging at an accelerating pace. As more information becomes available, our industry will be better able to promote the healthful effects of these nutrients when used in foods, beverages and dietary supplements. BASF engages in basic and applied research and supports scientific conferences, including directed studies. BASF focuses its support on: the potential preventative effects of vitamin E on chronic degenerative diseases, including Al­zheimer's disease, diabetes, coronary heart disease, cancer, cataracts and macular degeneration; optimal combinations and synergistic effects of vitamins D, A, K, E, C, B2, B6, B12, folic acid and carotenoids for general health maintenance and specific target tissue and organ wellness; caro­tenoids, lycopene specifically, as a powerful antioxidant to help prevent certain cancers, reduce the risk of cardiovascular diseases and protect the skin against harmful ultraviolet rays; and nutrients of increasing interest, such as omega 3 fatty acids, which may have greater significance in the population's well-being in the future."

Mike Doyle
Director, Human Nutrition
BASF North America
Florham Park, NJ


"As 2004 comes to an end, there is much the industry can be proud of, from obtaining qualified health claims for omega 3 fatty acids to working with the FDA to re­move 'pro-hormones' from the marketplace. One must realize that self-policing and reporting companies and ingredients to FDA because they do not meet the provisions of DSHEA will uplift the industry and ensure better quality control and consumer confidence. As a clinical researcher, I am happy to see more dietary supplement companies sponsoring independent clinical trials for safety and efficacy of their products. Validating products through science and then being able to use that science in patents and marketing is a tool that appears to be more regulatory friendly and understood by consumers. Companies like EAS, Nutrition 21, Metabolife and others do more research than most know, and others should follow their lead (not to mention the fact that it is tax-credible [IRS Code 174]). Be active, but better yet, be proactive in obtaining first hand safety and efficacy data for your ingredients and finished products because this can build your business more than you know."

Douglas Kalman MS, RD, FACN
Director, Nutrition &
Applied Clinical Research
Miami Research Associates (MRA)
Miami, FL