U. S. Food and Drug Administration
Center for Food Safety and Applied Nutrition
March 1999

Economic Characterization of the
Dietary Supplement Industry
Final Report

Preface

1. Introduction

2. Production and Supply of Dietary Supplements

2.1 Production Processes for DS Products

2.1.1 Production Processes for Vitamins

2.1.2 Production Processes for Minerals

2.1.3 Production Processes for Herbals and Botanicals

2.1.4 Production Processes for Amino Acids

2.1.5 Production Processes for Proteins

2.1.6 Production Processes for Animal Products

2.1.7 Production Processes for Other DS Products

2.2 Final Dosage Forms

2.2.1 Capsule Dosage Forms

2.2.2 Tablet Dosage Forms

2.2.3 Liquid Dosage Forms

2.2.4 Powder and Granule Dosage Forms

2.2.5 Lozenge Dosage Forms

2.2.6 Packaging of Dietary Supplements

2.3 Good Manufacturing Practices

2.4 Production Costs for Dietary Supplements

3. Facilities and Firms

3.1 Facility Characteristics

3.2 DS Financial Data

4. Demand for Dietary Supplements

4.1 DS Product Characteristics and Uses

4.1.1 Vitamins

4.1.2 Minerals

4.1.3 Herbals and Botanicals

4.1.4 Amino Acids

4.1.5 Proteins

4.1.6 Animal Extracts

4.1.7 Metabolites, Constituents, and Concentrates

4.1.8 Other Supplement Products Not Elsewhere Classified

5. Dietary Supplement Markets, Distribution Channels, and Industry Structure

5.1 Sales of Dietary Supplement Products

5.1.1 Vitamin Supplement Sales

5.1.2 Mineral Supplement Sales

5.1.3 Herbal and Botanical Supplement Sales

5.2 Sales and Marketing by Distribution Channel

5.2.1 Food Store Sales and Marketing

5.2.2 Drugstore Sales and Marketing

5.2.3 Mass Merchandiser Sales and Marketing

5.2.4 Natural Food Store Sales and Marketing

5.2.5 Multilevel Marketing

5.2.6 Mail Order and Internet Sales and Marketing

5.2.7 Health Care Practitioner Sales and Marketing

5.2.8 Specialty Shops

5.2.9 Distributor and Manufacturer Marketing Efforts

5.3 Market Structure of the Dietary Supplement Industry

5.3.1 Market Concentration

5.3.2 Product and Brand Differentiation

5.3.3 Barriers to Entry

5.3.4 Vertical Integration

6. Dietary Supplement Industry Data and Projections

6.1 DS Industry Data

6.1.1 Domestic Industry Data

6.1.2 International Trade Data

6.2 DS Industry Projections

References

Appendix A Calculation of Market Concentration Measures

PREFACE

The Food and Drug Administration (FDA) contracted with Research Triangle Institute (RTI) to collect information and report on the nature, size, and scope of the dietary supplement industry. This document is the final draft of the Dietary Supplement Industry Characterization Report provided under the contract.

The products that are the focus of the report are based on the definition of dietary supplements in the Dietary Supplement Health and Education Act of 1994 (DSHEA). They are the following:

vitamins;
minerals;
herbals and other botanicals;
amino acids;
dietary substances used to supplement the diet by increasing its total daily intake; and
concentrates, metabolites, constituents, extracts, and combinations of these ingredients.

In addition, these products must be intended for ingestion in pill, capsule, tablet, or liquid form; must not be represented as a food or sole item of a meal or diet; and must be labeled as a "supplement."

FDA requires the information contained in this report to aid in conducting regulatory impact analyses under DSHEA. According to Young and Bass (1994), DSHEA

establishes dietary supplements as a new category of food,
defines dietary supplements and ingredients,
includes enforcement provisions for adulteration standards,
excludes accompanying literature from the definition of labeling and thus allows it under certain conditions,
allows for a claim of benefit and role of the product on its label,
establishes labeling practices regarding ingredients and nutrition,
requires pre-market notification of new dietary ingredients,
authorizes the Secretary of Health and Human Services to issue regulations prescribing good manufacturing practices (GMPs),
establishes a commission on dietary supplement labels, and
establishes an office of dietary supplements within the National Institutes of Health.

Nearly all information contained in this report was obtained from secondary data sources. In addition to searching secondary data sources, RTI met with the following individuals in the course of obtaining information on the industry:

Loren D. Israelsen, President, Utah Natural Products Alliance;
Jill Ellis, Director of Science & Quality Assurance, National Nutritional Foods Association;
John Hathcock, Director of Nutritional & Regulatory Science, and John Cordaro, President and Chief Executive Officer, Council for Responsible Nutrition;
Jeffrey M. Morrison, President, American Herbal Products Association; and
Patrice B. Wright, Director of Pharmacology and Toxicology, Nonprescription Drug Manufacturers Association.

Summaries of RTI's interviews with these individuals were provided previously to FDA in site visit summary reports.

This document was issued in March 1999.
For more recent information on Dietary Supplements
See http://www.cfsan.fda.gov/~dms/supplmnt.html

Dietary Supplements

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Preface
1.	Introduction
2.	Production and Supply of Dietary Supplements
	2.1	Production Processes for DS Products
		2.1.1	Production Processes for Vitamins
		2.1.2	Production Processes for Minerals
		2.1.3	Production Processes for Herbals and Botanicals
		2.1.4	Production Processes for Amino Acids
		2.1.5	Production Processes for Proteins
		2.1.6	Production Processes for Animal Products
		2.1.7	Production Processes for Other DS Products
	2.2	Final Dosage Forms
		2.2.1	Capsule Dosage Forms
		2.2.2	Tablet Dosage Forms
		2.2.3	Liquid Dosage Forms
		2.2.4	Powder and Granule Dosage Forms
		2.2.5	Lozenge Dosage Forms
		2.2.6	Packaging of Dietary Supplements
	2.3	Good Manufacturing Practices
	2.4	Production Costs for Dietary Supplements
3.	Facilities and Firms
	3.1	Facility Characteristics
	3.2	DS Financial Data
4.	Demand for Dietary Supplements
	4.1	DS Product Characteristics and Uses
		4.1.1	Vitamins
		4.1.2	Minerals
		4.1.3	Herbals and Botanicals
		4.1.4	Amino Acids
		4.1.5	Proteins
		4.1.6	Animal Extracts
		4.1.7	Metabolites, Constituents, and Concentrates
		4.1.8	Other Supplement Products Not Elsewhere Classified
5.	Dietary Supplement Markets, Distribution Channels, and Industry Structure
	5.1	Sales of Dietary Supplement Products
		5.1.1	Vitamin Supplement Sales
		5.1.2	Mineral Supplement Sales
		5.1.3	Herbal and Botanical Supplement Sales
	5.2	Sales and Marketing by Distribution Channel
		5.2.1	Food Store Sales and Marketing
		5.2.2	Drugstore Sales and Marketing
		5.2.3	Mass Merchandiser Sales and Marketing
		5.2.4	Natural Food Store Sales and Marketing
		5.2.5	Multilevel Marketing
		5.2.6	Mail Order and Internet Sales and Marketing
		5.2.7	Health Care Practitioner Sales and Marketing
		5.2.8	Specialty Shops
		5.2.9	Distributor and Manufacturer Marketing Efforts
	5.3	Market Structure of the Dietary Supplement Industry
		5.3.1	Market Concentration
		5.3.2	Product and Brand Differentiation
		5.3.3	Barriers to Entry
		5.3.4	Vertical Integration
6.	Dietary Supplement Industry Data and Projections
	6.1	DS Industry Data
		6.1.1	Domestic Industry Data
		6.1.2	International Trade Data
	6.2	DS Industry Projections
References
Appendix A Calculation of Market Concentration Measures

U. S. Food and Drug Administration Center for Food Safety and Applied Nutrition March 1999

Economic Characterization of the Dietary Supplement Industry Final Report

Table of Contents

PREFACE

U. S. Food and Drug Administration
Center for Food Safety and Applied Nutrition
March 1999

Economic Characterization of the
Dietary Supplement Industry
Final Report