Center for Food Safety and Applied Nutrition
March 1999
Economic Characterization of
the
Dietary Supplement Industry
Final Report
The dietary supplement (DS) industry is made up a diverse set of products that are produced by a variety of manufacturers and distributed through a variety of channels. For these reasons, characterizing the industry is difficult. Furthermore, the industry has experienced tremendous growth recently due to increased consumer interest in these products, so information on the industry is continually being updated.
This report contains the most recent information available from secondary data sources on the size, scope, and nature of the DS industry. The products that are the focus of the report, which are based on the definition of a dietary supplement as contained in the Dietary Supplement Health and Education Act (DSHEA) of 1994, are:
| Vitamins | Products that are organic (carbon-containing) nutrients that are essential in small quantities for normal metabolism, growth, and well-being. They must be obtained through the diet because they either are not synthesized in the body or are not synthesized in adequate amounts. |
| Minerals | Products that are chemical elements in their inorganic forms. "Minerals" are those that are required in amounts greater than 100 mg/day, and "trace minerals" are those required in lesser amounts. |
| Herbals & Botanicals (other than extracts) | Herbal or botanical products prepared by means other than extraction (i.e., dried, crushed, and encapsulated). These may include teas in addition to other product forms. The term herbal refers to the leaves and stems of the plant while botanical refers to these parts in addition to roots, seeds, and fruits. |
| Herbal and Botanical Extracts | Products that are extracts made from any part of a plant. |
| Animal Extracts | Products that are extracts made from animal parts (e.g., tissues and glands). |
| Amino Acids | Products that contain an amino group and an acidic function. |
| Proteins | Products with the complete set of amino acids to make up proteins. |
| Concentrates, Metabolites, Constituents | Products that are concentrated, are broken down into individual components, or are parts of other products. |
| Teas | Products infused in water that contain herbals, botanicals, or other DS products. Basic tea products have a standard of identity as a food product; however, many products are a combination of tea and dietary supplements. |
| Other Dietary Supplements | All other products meeting the criteria of dietary supplements that cannot be classified into the categories above. They include, for example, bee pollen, propolis, and royal jelly; coenzyme Q; spirulina and other algaes; and nucleic acids. |
While some of these products (i.e., vitamins, minerals, and proteins) are taken because they are essential nutrients, others are taken for other reasons. In particular, herbal and botanical products are generally taken for reasons other than nutrition, although current FDA regulations restrict the types of claims allowed on the product. Products other than vitamins and minerals are only in the initial stages of standardization by members of the industry; thus, even a particular type may contain many heterogeneous products. As one would expect, the production processes vary greatly both between product types and within a product type.
Industry statistics are difficult to come by because these products are scattered across at least eight different 4-digit Standard Industrial Classification (SIC codes) and nearly 80 different 6-digit international codes. In addition, different trade organizations cover varying aspects of the industry. These include the Council for Responsible Nutrition, which in the past concentrated primarily on vitamins and minerals but is now branching out into other DS products; the American Herbal Products Association, which contains primarily smaller herbal and botanical product manufacturers but is adding larger members over time; the Nonprescription Drug Manufacturers, which represents the larger over-the-counter pharmaceutical manufacturers, many of which produce vitamins and minerals; the Utah Natural Products Alliance, which represents eight large firms that are located in Utah but that have national distribution channels; and the National Nutritional Foods Association, which covers retailers in addition to manufacturers and is working on standardizing products. Many other smaller organizations represent various aspects of the industry as well.
The distribution channels for products are many and varied and include channels through which companies
In addition, a large volume of sales is through direct sellers such as mail order and multilevel marketing. Figure 1-1 reproduces from Nutrition Business Journal an outline of the distribution channels for all nutrition products. As represented, the raw material providers and manufacturers are distinct among the natural food, DS, and natural personal care lines, but the product lines share common distributors and retailers. However, this diagram does not clearly indicate the extent to which foreign firms are part of the distribution structure. International trade is a large component of the DS industry as many products sold in the U.S. are manufactured from imported raw ingredients or are imported as finished products.
Figure 1-1. Outline of the Distribution Channels for All Nutrition Products
Source: Nutrition Business International.
September 1998. "$23 Billion and Counting: Nutrition
Industry Braces for a Competitive Future." Nutrition
Business Journal 3(9):1-5, 13, 18.
In the following sections, we provide more detailed information on the DS industry as a whole. In Section 2, we provide an overview of production practices for the different types of DS products. In Section 3, we summarize information on the facilities and firms as contained in the Dietary Supplement Enhanced Establishment Database (DS-EED), which is being created by RTI. In Section 4, we describe the uses and consumers of DS products and discuss substitution possibilities. Sales and marketing of DS products as well as industry structure are described in Section 5. Finally, we include information on SIC codes, international codes, and industry statistics, as well as projections, in Section 6.