Vitamin Industry Still Looks Undernourished Months After Harsh Studies

Price-Focused Walmart and Online Players Gain, But Multivitamins Sluggish

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Vitamins have been a big growth market for decades, enough to entice such major packaged-goods players as Procter & Gamble Co., Reckitt Benckiser and Church & Dwight Co. to acquire or expand their way into the space in recent years.

But three studies finding no health benefits in multivitamins, accompanied by an unusually harsh December editorial ("Enough Is Enough: Stop Wasting Money on Vitamin and MIneral Supplements") in the Annals of Internal Medicine, appear to be taking a toll on the business. A simultaneous shift toward price-oriented online retailers, Walmart and club stores is also pressuring prices.

For the 52 weeks ended Aug. 2, total vitamin sales grew only 1.5% to $10 billion, according to Nielsen data from Deutsche Bank. That's well off the 8.3% growth rate the category was seeing a year earlier in the Nielsen data.

Kurt Jetta, CEO of the Tabs Group, an analytics firm that recently completed its seventh annual study of the vitamin business, sees an "overall lethargy" in the business this year that he attributes to the negative effects from the studies. Mr. Jetta still projects overall growth of 3% to 4% for 2014 in a business he pegs at $11.4 billion in all channels, though he's leaning more toward low end of that range, well below high-single or even double-digit growth rates in years past.

The effect is most noticeable on the segment targeted by the study -- multivitamins -- he said. That's in line with prior studies in the past decade that put the kibosh on beta-carotene and vitamin E, yet seems to be having a broader effect than the decline of those businesses had.

"Typically the negativity is isolated only on the one product," Mr. Jetta said. "But this one seems to be a bit broader and brought an overall malaise to the category."

At the same time, the category this year hasn't seen much big innovation in forms or types of nutrients, like probiotics or gummy vitamins introduced in recent years. And the retail players gaining share -- Walmart and online in particular -- are more price focused, while some retailers that had backed away from deep-discount promotions, such as Walgreens, are coming back to it.

The public battle involving activist investor Bill Ackman accusing Herbalife of being a pyramid scheme – denied by Herbalife – appears to have hurt the multilevel marketer channel in vitamins too, Mr. Jetta said, taking its share from the historic 1%-2% range to under 1% in the Tabs consumer-panel study.

Still, some of the newer CPG entrants into the business are seeing growth. Church & Dwight CEO Jim Craigie said on a company earnings call earlier this month that its Avid gummy-vitamin business saw double-digit growth last quarter behind a push into adult products "despite flat category growth caused by unfavorable publicity." Gummies now get 7% of vitamin sales, he said, double the share in 2012 when Church & Dwight bought the business.

P&G, which is expanding the Swisse Wellness vitamin brand outside the U.S. through its partnership with Teva and launched Align probiotics in 2009, recently expanded its presence in supplements further with the launch of MetaBiotic, a probiotic offshoot of Metamucil. A spokeswoman said the Meta product, designed to promote a healthy immune system and digestive health, isn't meant to compete with Align or pave the way for the brands to be merged. Align uses a different probiotic strain and targets only digestive health, she said.

The publicly available sales data don't cover much of the retail space where vitamin and supplement sales are growing fastest -- online and club stores -- noted Reckitt Benckiser General Manager-Marketing for North America Laurent Faracci in an interview. And RB's Mega Red fish oil and Airborne "immune-system support" products compete largely outside the scope of last year's studies on multivitamins.

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