January 19, 2021    9 min read

The vitamin and supplement industry manufactures and sells goods to support dietary requirements, including products to complement health and fitness regimes. Typical firms will use nutraceutical software to support their own manufacturing, or to manage the process via contract manufacturers – handling purchasing, distribution, and sales and marketing in-house. Products manufactured include vitamin and mineral supplements, along with dietary products designed to support weight-loss and strength-building.

The state of the vitamin and supplement industry – a quick snapshot

  • The vitamin and supplement industry is expected to grow over the next few years, following increasing interest globally in healthier lifestyles. The Covid-19 pandemic has proved a double-edged sword for the industry, undercutting revenues while also boosting interest in health-related products, particularly immune system support.
  • Beyond in-store shopping, online sales are also expected to grow, as the pandemic shifts purchasing habits and consumers seek out discounted prices or special deals.
  • However the industry will continue to face headwinds, as a result of supply chains disrupted by the pandemic, increased competition and increased regulatory oversight.
  • In Australia, rising interest in the fitness and wellbeing industries over recent years has helped support an increase in product sales. Sales have also been driven by an increasing number of outlets stocking the products, including day-to-day stores such as supermarkets. Revenue over 2020 contracted due to the pandemic, but recovery is expected to be relatively fast. Sales of Australian products overseas are forecast to rise over the next few years, particularly to countries like China. Demand is in part led by the country’s reputation for ‘clean, green’ products, which is a major drawcard for consumers out of Asia.
  • The industry in the UK, which has been hit hard by Covid-19, has also benefited from the increased interest in healthy living. While the pandemic has put pressure on revenue, it has also prompted a notable increase in demand for immunity-boosting products such as vitamins C and D. The increase has been such that major companies have been on recruitment drives, despite the challenges of multiple lockdowns.

Technology trends in the vitamin and supplement industry

The vitamin and supplement industry is evolving rapidly, with newcomers entering the market and challenging existing players. While there are high barriers to entry, pockets of the industry remain under-served and start-ups and smaller operators are innovating in these areas.

Access to personalised data through wearables and other tech is driving a trend towards personalised health.

Personalised data and innovation

The increasing sophistication of digital devices and tools is driving demand for products which integrate health data and provide personalised data points to the user.

This trend has been exacerbated by the pandemic, during which consumers sought to gather information on health indicators, without needing to leave their homes or interact personally with medical professionals.

In Australia, there is the potential for healthcare companies to collate all available health data as they seek to provide more customised products for their local consumers. The rise of 3D printing technology is also being tagged as another potential influence on the market, with its ability to create products or tools on site, rather than depending on supply lines.

However Australia’s strict regulations and controls on the industry does cause a drag, and means innovation is relatively slow.

The move to digitisation

Companies are also benefiting from technological advances that contribute to more streamlined production lines. Investment in such technology means companies can minimise wage costs, and in turn support profit margins.

Like Australian manufacturers, UK operators are investing in technology designed to improve the speed and efficiency of product manufacturing. Among other innovations is technology that supports the ability to pull nutrients out of base ingredients, among other benefits.

The industry is also seeing increased synthesisation of natural ingredients, with product formulas becoming more sophisticated, in order to meet specific consumer demands.

Globally, there is also the opportunity to create improved online purchasing experiences, as consumers hunker down indoors – whether by choice or due to lockdowns – and avoid unnecessary trips outside and interactions with strangers. 

Consumer trends in the vitamin and supplement industry

In recent years people around the world have become more invested in healthier lifestyles, with the pandemic accelerating demand for particular healthcare products. Beyond the pandemic, broader trends such as aging populations, obesity concerns and a greater awareness of wellbeing have supported the industry’s growth.

‘General health’ is still the biggest driver for sales, with heart health, healthy aging and mental health the next biggest areas of concern.

The pandemic and risk of a Covid-19 infection has also created an increased interest in immunity-boosting products, a trend which is likely to continue beyond 2021.

Wellness and sustainability

There is also a rise in demand for organic, plant-based and vegan products, as consumers become more aware of environmental concerns. This also reflects a belief that the  pandemic came about as a result of human consumption of animal meat.

The trend away from animal products is creating opportunities for smaller players in the industry, who are promoting vegan and organic products to consumers.

Sports, nutrition and weight control

In Australia, sports nutrition products are a significant part of the market, with performance enhancers and dietary support used by both regular gym-goers and elite athletes. Rising numbers of obese Australians are also driving sales of weight management products.

Younger generations are also expected to contribute to rising usage of supplements, with the pandemic contributing to increased awareness and care of personal health and wellbeing. These younger generations are driving an increase in sports-related products and meal replacement products.

Age and longevity

The UK in particular also has an aging population, with rising obesity a serious health concern. The country’s public health body, the NHS, has suggested those over 65 take supplements to support general health. This drive, combined with the aging population, is expected to support the industry’s growth in that country over the coming years.

Aging populations provide a continued tailwind for the supplements and vitamins industry.

Legislation trends & changes

The vitamin and supplements industry is regulated to varying degrees across different jurisdictions, with products classed across categories including complementary dietary needs or prescription medicines.

Australian legislative changes

In Australia, the industry is regulated by the Therapeutic Goods Act 1989, and overseen by the Therapeutic Goods Administration, known as the TGA.

The TGA regulates all industry products for safety and quality. It allows only approved ingredients to be used, and requires the commercial sponsor of the product to provide evidence that the product does what it says. The sponsor cannot make claims around serious or life-threatening illnesses.

New labelling requirements are due to be implemented in Australia over the next year, adding another layer of requirements for manufacturers to meet.

As such the regulatory burdens are significant, creating pressures on the industry. Those pressures have been exacerbated by discount retailers such as Chemist Warehouse becoming major stockists of products, and in turn driving down profit margins.

UK legislation

In the UK, different categories of products come under different regulatory bodies. Products categorised as ‘food’ come under general food safety rules, while those defined as ‘medicines’ come under the Medicines and Healthcare products Regulatory Agency (MHRA).

Businesses that sell these products must register as an ‘FBO’, or Food Business Operator, and comply with rules around safety of consumption, traceability of ingredients, and accurate labelling. All products have to meet quality requirements, and the MHRA has the ability to pull products from the market if it is deemed substandard.

Herbal medicines have another requirement, in that they must have a ‘Traditional Herbal Registration’ evidencing they do not cause harm.

At present, most products are defined as ‘food’, which has a lower bar of evidence as to health benefits.

Financial performance in the global vitamin and supplement industry – a snapshot

The global vitamin and supplements industry was valued at more than US$48 billion in 2019. It is expected to push toward US$118 billion by 2027, with the pandemic being a positive influence on the market over the medium- to longer-term.

Rising costs, increased competition, pressure on profits and regulatory burdens will continue to create a drag on growth, however.

In Australia, industry revenue is expected to recover from its pandemic-related glitch and continue an upward trajectory, hitting AU$1.6 billion by 2020. The rise of around 6% each year is underpinned by an increased awareness of health and a greater availability of products, from supermarkets and other easily accessible stores.

Demand from Asia is also a major factor, with Australia’s ‘daigou’ channels ensuring the flow of products into China and other countries. It should be noted, however, that the daigou community has come under increasing scrutiny and regulatory changes in China may constrain growth.

The pandemic’s disruption of supply chains into China is also a limiting factor of the industry’s growth, at least in the short term.

  • Profit margins in Australia sit just over 10%, but this is expected to fall as competition, cheaper pricing and regulatory burdens place a strain on the industry. Exports are expected to buffer the industry, with sales to China increasing dramatically over 2018-2019 to more than AU$680 million.

In the UK the industry has expanded rapidly in recent years, and the pandemic is expected to fuel that growth. Official recommendations to use supplements to support healthcare needs in old age have contributed to the industry’s reputation and expansion.

Beyond rising domestic demand, exports to the likes of North America and China are expected to support revenue growth. Like Australia, the UK benefits from a positive reputation globally for the safety of its products.

Revenue is expected to increase by more than 13% annually over the next couple of years, hitting GBP1.2 billion by 2021. By 2026, revenue is expected to reach GBP1.8 billion.

  • Profit margins in the UK sit around 12%, but that may get crunched as more operators enter the market and products are sold at a wider range of outlets, some of which are discount retailers.

Renewed focus on Vitamins C and D

The Covid-19 pandemic has driven a surge in demand for immunity-boosting products including vitamin C and D. The trend is being supported by nutritional advocates campaigning to make the promotion of vitamins part of the strategy to combat the virus.

The ‘VitaminC4Covid’ campaign, launched in response to the COVID-19 pandemic, argues the use of vitamins is hugely beneficial to tackle the virus and is pushing to have the products used to help care for the elderly and vulnerable particularly.

Vitamin C is seeing renewed interest as an immune-boosting supplement.

In the UK, Public Health England has recommended low daily usage of vitamin D to assist in combating the virus, and continues to review the products.

Further explorations are underway as to the benefits of certain vitamins, including trials overseen by the Intensive Care National Audit and Research Centre as to the impact of high-doses of vitamin C on patients suffering Covid-19-related pneumonia.

The Australian government has thus far been more circumspect in its recommendations, although one of the country’s wealthiest women, Gina Rinehart, drew attention to the cause by promoting the use of vitamins to combat the illness.

Rinehart, a billionaire mining magnate, posted a blog from Professor Ian Brighthope, Founder and Managing Director at NutriGenomics Australasia, advocating for the usage of vitamins to tackle the virus.

In the blog, Professor Brighthope wrote, “Nutrients are powerful therapeutic agents. Without vitamins we die. With inadequate vitamin levels we get sick. With optimum levels, we thrive and reduce the risk of disease and death.”

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