Private Label Dietary Supplements

Retailers discover the benefits of supplying private label dietary supplements

The growth of private label food and related goods is unmistakable. Recent data from the Private Label Manufacturers Association (PLMA) shows private label growth is outpacing national brand growth by almost 2-to-1. In fact, the group reported private label goods are a $50 billion industry, with one out of every five products sold in U.S. mass channels being private labeled. “The growth of private label brands over the last couple of years has been exponential due to the consumer’s basic change in perception of the quality of private labeled products,” explained Scot Ballantyne, president of Tampa Bay CoPack. However, the growth of private label dietary supplements is less clear, although many insiders suggest growth potential is huge in this segment.

According to Information Resources Inc., private label vitamins totaled $653 million in sales and 98.2 million units sold in the 12 months ending July 2007; this represents a 2-percent decrease in dollar sales and a 4-percent drop in unit sales. To boot, mineral supplements, multivitamins, and single or double-formulation vitamins took a slight dive in sales. The bright spot was liquid vitamins and minerals, which grew 6 percent in dollar sales ($3.7 million) and 12 percent (500,000) in unit sales.

On the other hand, manufacturers such as Vitamer Labs, which produces premium private label supplements, report robust supplement sales. “We have seen significant, double-digit growth in both the natural and crossover and grocery channels,” said Erin Silva, Vitamer’s technical marketing manager. “Customers today demand natural, organic and premium products, and they’re pleased to find their loyal store brand can now offer high-quality products at a reasonable price.”

There are many factors in the growth of private label supplements. According to Jill Taylor, director of marketing for Reliance Vitamins, a nutritional supplement private label maker, there’s a critical need for companies to differentiate themselves and carry exclusive products the consumer can only purchase from them. “Some of this need is driven by the great number of internet sites offering discount prices on national brands, so in recent years retailers are actively seeking private label brands,” she said, adding the tight economy is also sending consumers more keenly in search of value products.

Tim Greene, director of sales of branded and private label at Century Foods, suggested a few other factors. “The supplement or health and personal care (HPC) area of stores are underdeveloped areas for private label for most retailers,” he reasoned. “I also believe these categories are emerging in these retailers; for instance, protein really wasn’t on the radar screen for most retailers a year ago, but it’s become very topical now, and we are seeing it in Wal -Mar t and other big retailers as a meaningful part of their HPC department.”

A big draw for retailers is sticking in the consumers’ minds via private labeling. As Taylor explains it, “In general, by of fering a product line that is exclusive to the store, a consumer who purchases the store private label brand must return to that store to purchase that same product again. It also creates a ‘marketing impression’ every time the consumer picks up that product to take it or use it, reminding them of the store and other items they may need to purchase.” She added a premium private label manufacturer helps the store by offering a private label line with strong scientific validation, so that the supporting information stands on its own, further increasing the consumer’s confidence in that store and their recommendations.

In Silva’s mind, this is where private label makes its mark—by enhancing the brand awareness of a retail store. “We advertise [the retailer’s] name hundreds of times with each bottle purchased,” she said. “By choosing a premium, quality dietary supplement supplier, retailers build a loyal customer base that wants to return to their store and purchase the same product they may not find anywhere else.”

The idea of premium products has really been the focus of the private label revolution, as store brand products are of equivalent or better quality than national brands. “The gap between private label and branded is almost negligible now,” Greene suggested, adding it is hard to tell the difference on most private label version of the national brands. “Retailers are demanding that level of quality, with many taking the demand a step further by requesting their brand to be national brand better (NBB); so the goal is for the manufacturers to come up with formulations or packaging that is a step above what the brands are doing.” He reasoned this call-and-response by retailers and contract manufacturers has taken private labeling to a whole new level.

Silva agreed the private label segment has edged ahead of many brands in offering an even bet ter product than some brands. “We recently introduced a line of Ultimate Organics™ products that meet current consumer demand for organics,” she reported, noting, at the moment no other brand can offer a certified organic vitamin C tablet, for example. “This is due, in part, to our decision to embark on the organic route by having our manufacturing facility certified organic by Quality Assurance International (QAI ), by becoming an active member of the Organic Trade Association and by making environmental and social responsibility commitments business-wide.”

As beneficial as private label goods may be, not every retailer is in the position to have their own line of supplements. Greene explained small retailers fail to meet minimum run requirements of private label contract manufacturers, which need to produce a certain size run of customized formulations to attain cost and value efficiencies. “It’s size-dependent,” he said, of the ability to go private label. “Some retailers don’t have critical mass to do a vast array of private label items—down to a 1,500-sq-ft. store level, it can be difficult to produce private label line. Sometimes it’s cost prohibitive for them and contract manufacturers to get to the level of efficient runs —there is no way to do minimum volume runs for 11- to 50-store operations.”

This might preclude smaller health food retailers from seeing their own formulations come to fruition in the form of line of finished supplements, but there is still a way for them to get in on the private label wave. The solution for such retailers may be to use a procurement company that offers procured private label lines to many different independent, often small, retailers. According to Greene, such companies already have a lot of the necessary pieces in place, such as quality control (QC) and quality assurance (QA). The procurement company will find different contract manufacturers to source the product from; they can evaluate the different manufacturers and capabilities and pricing structures those manufactures bring to bear. “They can eliminate a lot of the legwork required to bring a product to market,” Greene said.

But what goes into a good private label retailer? Given the quality controversies over recent contract manufactured supplements and foods, quality production is high on the list of requirements. “Retailers are more aware of their need for quick responses on issues that the media publicize that may affect their business, so they’re requesting information we can quickly provide to them about our quality standards and compliance with GMPs,” Silva informed. Vitamer and other quality private label manufacturers meet the requirement of the recently released federal GMPs (good manufacturing practices) for dietary supplements.

Among the GMP-based requirements retailers are now presenting to potential private labelers is third-party testing of the product itself. Retailers want to be sure the products being made and bearing their brand contain what is on the ingredient label and are free from contaminants and adulterants. To this end, savvy retailers expect private label manufacturers to have certain certifications based on specific audits of the manufacturing facilities and processes by accredited certifiers, such as QAI and NSF International. Greene said, generally, retailers will ask for documentation, and Century Foods provides whatever information the retailer needs. “One of the most stringent audits is NSF,” he noted. “But GMPs are a valid concern, and retailers should be looking at certification when evaluating different contract manufacturers who are offering to present private label products to them.”

While some companies have been GMP-certified by NSF or even the Natural Products Association (NPA), the federal rules go into effect shortly, which will level that particular field of play. “GMP status is going to be a requirement for all manufacturers in the near future, so finding other avenues of how much a manufacturer can deliver on quality, natural and organic product offerings, technical support services, and other quality standards such as social and environmental responsibility commitments will be key,” Silva quipped.

Taylor countered she is not sure there is more scrutiny of private label companies due to quality gaffes reported in the media and GMPs, but these factors are making retailers more aware of the issues that exist in the marketplace and are provoking them to carefully assess all of their suppliers.

“Reliance relishes questions and research by retailers, as this always serves to strengthen the confidence they have in our products,” she reasoned. “We use the phrase ‘meaningful quality’ to describe our products and back that up with specific data, like using over 50 patented and trademarked ingredients throughout our product line (scientific validation), utilizing European standardized herbal extracts (proven safe and effective), offering independent analysis of our finished products (assurance of label claim) and having open disclosure of our raw material suppliers (for the most informed buying decisions).”

She added while GMP status is important, an equally important and of ten overlooked issue is the objective, tangible data that backs up the raw material selection the company chooses to incorporate. Thus, it’s important for retailers to ask for a combination of scientific validation, label claim assurance and raw material disclosure. This is helps the retailer confirm the safety and efficacy of the ingredients that go into the products that will carry the store’s brand.

Finding the right private label provider is only one part of the equation, albeit a big and important step. Another big decision is what type of supplements to include. Manufacturers report recent demand is for both classic and specialty formulations. “We’ve always done well in the standard products such as letter vitamins, multis and powders; however, our retailers are becoming more interested in specialty formulas to offer in their own name,” Silva offered. “In the last few years, demand for omega-3 products, non-GMO (genetically modified organisms) and organic have taken off.”

Greene remarked retailers are looking for anything that aids in person’s diet and addresses health issues like diabetes and osteoporosis. “Retailers are looking for condition-specific conditions,” he said. “The immune support category seems to be exploding; a lot of retailers are jumping in a big way into this category, which continues to grow at high double-digit rates.”

Taylor said the best sellers in private label lines tend to follow the bigger trends in the marketplace. “That said, the great news is that retailers can choose to make their brand the category leader in their stores,” she countered. “Signage, merchandising, support information and an attractive price can all help increase sales, but the single biggest factor is the recommendation of the staff and owner.” She noted some of Reliance’s smallest stores in square footage yield some of the largest overall sales numbers, simply because the staff and owner are behind the line 110 percent. Ballantyne echoed Taylor’s sentiments, and noted that stores are now giving proprietary brands better floor space, as well as increased promotion in weekly circulars. “While moving away from an item-driven business, private brands are being created to communicate quality, style and value for the entire store,” he added.

There is a changing of the guard on the supplement shelves of retail stores, as private label vitamins, minerals and specialty products are competing admirably with national brands in delivering the highest quality products in the most innovative formulations. This can be a huge boost to the brand awareness and consumer loyalty for retailers of all sizes.

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