Case Study: PepZin GI

Business Description: PepZin GI is marketed exclusively by Lonza, Allendale, NJ, in the U.S. PepZin GI is a patented zinc-carnosine complex that targets stomach health, as opposed to overall digestive health. In the nutrition industry, Lonza is best known for niacin and carnitine supply.

Theme: Lonza sees great potential in carving out the stomach health niche within dietary supplements for its PepZin GI product, and this analysis looks at how it must position itself going forward.

Background: The market for stomach health is very large, and by definition, it includes several conditions and symptoms like ulcers and heartburn. In the U.S., there are approximately 20 million Americans suffering from ulcers and about 50 million people suffering from heartburn. Since 1994, PepZin GI has been available as a pharmaceutical in Japan (Polaprezinc) for use in the treatment of stomach disorders such as ulcers, dyspepsia and infections associated with Helicobacter pylori (bacteria linked to the cause of stomach ulcers). PepZin GI was launched in the U.S. in early 2003 as a dietary ingredient in multiple channels. Using a staged rollout plan, exclusive distribution rights were granted to leading companies in four of the five key distribution channels. From a results standpoint, they have met aggressive sales volume and growth objectives, and sales figures for 2004 indicate a two- to three-fold increase over 2003 levels.


Situation Assessment: PepZin GI supports the stomach’s natural defense mechanisms, mitigating the effects of stress, bacteria and lifestyle challenges. While antacids are afforded over-the-counter (OTC) monograph status and Rx/OTC products can readily promote their efficacy against ulcers, PepZin GI must compete using only structure/function claims. This brings the product into direct and indirect competition with other well-known dietary supplement products, such as probiotics, prebiotics, digestive enzymes and herbal remedies. While growing interest exists within the nutrition arena for addressing digestive health (including probiotics, prebiotics, digestive enzymes, herbals, etc.), identification of a new category targeting stomach health is missing. In many ways, this challenge is driven by the classic “prevention” benefit vs. “immediate” benefit debate. Aside from a technical definition, the concept of stomach health has a variety of meanings to marketers and consumers. In many ways, the U.S. consumer links stomach health with digestion, but whether the exact nature of a condition rests in the stomach or the intestines is immaterial to the typical consumer.


Opportunities: A key challenge in this market lies in the inexact definition of stomach health, and the need to clearly communicate PepZin GI’s uniqueness. No one dietary ingredient brand has stepped up to define what it means in the consumer’s mind and how its solution meets the market need. Lonza has built IP insulation around PepZin GI through the existence of a composition of matter patent. Its commercialization effort has focused on leveraging key partners to build consumer awareness in all distribution channels, which has allowed them to share the costs of educating the consumer. At the heart of Lonza’s challenge is how they must position themselves with differentiation going forward in relation to competition, consumers, partners and category. Not all products are capable of creating a category, and in reality, only consumers determine the viability of categories, not marketers. All a marketer can do is to help consumers understand the value of the product.


Lessons Learned: A priority for Lonza is to reinvigorate the PepZin GI brand. Due to a variety of factors, including the uniqueness of the technology and connection with consumers, it is critical for the company to fully analyze how a new category would fit in the market. (1) Few companies in the nutrition industry have made the commitment to building a category, as the required effort is significant. Risk and costs associated with building a category can often be tacitly shared among competitors with similar products; however, with no direct competitors Lonza is solely responsible for market development. (2) Demonstrating uniqueness and value is critical. It is doubtful that PepZin GI can produce relief at the same speed of an Rx or OTC product. Because of this, managing expectations of consumers is necessary. Lonza has several angles to connect with consumers through its unique story. (3) Lonza’s challenge becomes much more manageable, when it recognizes that it is hoping to capture a specific consumer group. It must focus on the consumer that has a long standing stomach condition or one looking for a natural solution—one that typically looks proactively for health solutions. This will guide its spending plan and commercialization efforts.