Nutraceutical-ExecutiveSummary.pdf

2012

CONTRACT MANUFACTURING • PACKAGING MATERIAL SEGMENTATION • INTERNATIONAL GROWTH • LABELING CONCERNS

MARKET SIZE & GROWTH RATES • NUTRACEUTICAL DRIVERS & TRENDS • REGULATIONSDOMESTIC AND INTERNATIONAL

A market research study that explores the trends and challenges to processing and packaging machinery manufacturers in the emergent nutraceutical industry

Nutraceuticals – Market Assessment

© Copyright 2012 Packaging Machinery Manufacturers Institute, Inc. All rights reserved. The information contained herein shall not be distributed or shared by the recipient. No part of this document may be reproduced without the express written permission of PMMI. This report is confidential and subject to change without notice. This report contains information protected by copyright. © 2012 Proactive Worldwide, inc. All rights reserved. Proactive Worldwide, PWW, Out in Front, 20/20 Insight, PowerSource, CI Navigator, and Business Intelligence Taskforce are trademarks, registered or pending, with the United States Patent and Trademark Office Product names mentioned herein may be trademarks and/or service marks of their respective companies.

Packaging Machinery Manufacturers Institute 11911 Freedom Drive, Suite 600 Reston, Virginia 20190 (703) 243‐8555 Publication Date: May 2012 Paula Feldman, Director, Business Intelligence PMMI

NUTRACEUTICALS

n u t R A c E u t i c A l M A R k E t A s s E s s M E n t

[ 3 ]

4 ExEcutivE Summary aNd PErSPEctivE

5 Overview 5 Definition of

nutraceuticals 5 Market size and Growth

Rates 6 nutraceutical Formats 6 nutraceutical Drivers and

trends 7 nutraceuticals

compared to Food and Pharmaceuticals

9 Regulation 10 Equipment supplier Expectations 10 contract and international Manufacturing 11 Perspective

table of contents

14 dEtailEd rEPOrt FiNdiNgS

15 definition of Nutraceuticals

16 Nutraceutical manufacturing Organizations

18 market Size and growth rates

20 Packaging Material segmentation

20 international Growth 21 Nutraceutical drivers and

trends 21 nutraceutical Formats and

Packaging 28 Nutraceuticals

compared to Food and Pharmaceuticals

28 Packaging 28 Packaging Equipment 31 Packaging Processes 36 co-mingling of Manufacturing

Operations 36 regulation 36 Perspectives on the

FDA’s Future Role in nutraceuticals

38 FsMA 38 Equipment Supplier

Expectations 38 Fast, Flexible, and Easy-to-use

Equipment 39 Quick and simple

cleaning 40 As-yet unmet

Expectations 41 communication between

Machines 42 Modular systems 42 Expectations about specific

Equipment suppliers 43 contract and international

manufacturing 43 Domestic Manufacturing 43 Packaging 44 concerns 44 Role of u.s. customs 45 labeling 45 international regulation

48 aPPENdixES 49 appendix a:

demographics and methodology

49 Demographics 50 Research Methodology 52 appendix B:

Project Scope 52 PMMi’s competitive

situation 52 key intelligence

Questions 55 appendix c:

code of Ethics

E x E c u t i v E s u M M A R y A n D P E R s P E c t i v E


[ 5 ]

dEFiNitiON OF NutracEuticalS

the word nutraceutical is a combination of the words nutrition and pharmaceutical. the term is used to mean any food or part of a food that pro-vides medical or health benefits, including the prevention or treatment of disease. nutraceutical products cover a broad range and include bever-ages, dietary supplements, genetically-engineered designer foods, herbal products, isolated nutrients, and processed foods.

the basic categories of nutraceuticals are 1) dietary supplements, 2) functional beverages, and 3) func-tional foods. For this study, sports nutrition and sports and energy drinks are included in all their respective food, supplement, and beverage cat-egories.

markEt SizE aNd grOwth ratES

the global nutraceutical market is expected to grow from $345 billion in 2011 to approximately $450 bil-lion by 2015. this represents an annual growth rate of 7 percent. nutraceutical beverages are expected to be a key growth area globally, with annual growth expected to be about 9 percent through 2015.

Overview

the modern commercial nutraceutical era began just a few decades ago, but the concept of nu-traceuticals has been around since ancient times. With rising healthcare costs and consumers’ growing interest in health, entrepreneurs are flooding into the nutraceutical industry with products of increasing specificity. Given the strong market growth prospects, it would be wise for packaging machinery manufacturers to better understand this unique industry sprouting up between the food and pharmaceutical industries.

this report is primarily derived from dozens of in-depth interviews and delves into the trends and dynamics of the nutraceutical industry to assist equipment manufacturers in providing better equipment solutions to this rapidly growing industry. Additional information on the demographics and study methodology is contained in the Appendix.


Global Contract and Branded Processing of Nutraceutical Products Sold in the

U.S. (2011)

200720112015

4%

88

118

167

68

112 118

138

171

89

3%

37%

51%

18%21%

24% 24%

4%3% 3%5%

47%

50%

10%

33%35%

28%

InternationalU.S.

Functional Beverages

Branded Mfr. Contract Mfr.

Vitamins & Dietary

Supplements

FunctionalFoods

$ B

illio

ns U

.S.

0

50

100

150

200

2011

2015

Historical and Projected U.S. Nutraceutical Sales 2007 to 2015

Nutraceutical Beverage Sales Comparison with All Beverages 2011 U.S. Nutritional Supplement Market-value

Share by TypeCurrent and Projected Beverage Packaging

Material Market Shares

Historical and Projected Global Nutraceutical Sales 2007 to 2015

200720112015


PETPlastic

HDPEPlastic

Can Glass Pouch

All Beverages

SpecialtySports Drinks

Energy Drinks

Weight Control/Nutritional Liq/Pwd

Vitamins & Dietary

Supplements

FunctionalFoods

$ B

illio

ns U

.S.

0

10

20

30

40

50

60

Large, Branded

Pharmaceutical Companies

Generic Pharmaceutical Companies and Large, Branded Nutraceutical

Companies

Contract and Small, Branded Nutraceutical Companies and

Food Companies

The stringency of the quality standardsincreases with each

tier up

Frequency ofChangeover

High

Moderate

Low

Attention toMaintenance

Spare PartsInventory

ManufacturingSpeed

$ Value ofProducts

Level of OperatorEducation

Level ofPackagingInnovation

Nutraceuticals: A Blend of Pharmaceuticals and Food

0 5 10 15 20

Global Contract and Branded Packaging of Nutraceutical Products Sold in the

U.S. (2011)

Potential Impact of FDA Regulation of the Nutraceutical Industry

Tiers of Manufacturing in Pharmaceutical, Nutraceutical, and Food Production

Industry Comparison of Packaging Processes

IMPACTS OF FDA REGULATION

InternationalU.S.

Branded Mfr. Contract Mfr.0

10

20

30

40

50

0

10

20

30

40

50

3%

50%

10%

Breakdown of Global Contract and Branded Packaging of Nutraceutical Products Sold in the United States

InternationalU.S.


10

20

30

40

50

Breakdown of Global Contract and Branded Manufacturing of Nutraceutical Products Sold in the United States

InternationalU.S.


5

10

15

20

25

30

35

0

10

20

30

40

50

60

Condolidation and higher barriers to entry reduce the number of equipment customers.

Industry growth may be stunted as com-panies adjust to regulation, resulting in slower equipment sales.

Number of products on market will likely be reduced. Equipment suppliers should shift focus to longer production runs & less need for changeover.

Remaining medium and smaller-sized companies will likely need assitance with equipment verification.

NEXT STEPS TO CONSIDER

Strenghten relationships with the larger and more economically nimble manufacturing companies as much as possible, as industry consolidation will likely reduce the customer base of smaller-sized companies.

Prepare for a period of slower sales of equipment lines and instead focus on spare parts and service.

The need for machines with extreme flexibility to handle very short production runs will likely be reduced. Instead, focus on offering better equip-ment for moderate production runs.

Provide verification packages and the services to help companies install new machines.

Potential Impact of No FDA Regulation of the Nutraceutical Industry

IMPACTS OF NO FDA REGULATION

Entrepreneurs continue to stream into the market, increasing demands on contract manufacturers.

To differentiate themselves, companies will likely look to packaging innovation, driving demand for packaging equipment with new capabilites.

Some of the larger companies may seek packaging differentiation by changing the capabilities of the packaging eqipment in-house.

Equipment managment and operating environments will continue to vary signifi-cantly between manufacturers.


Tailor sales and product development attention to the needs of contract manufacturers, as they will likely increase their share of production.

Explore developing partnerships with packag-ing material or packaging design companies to develop new patentable packaging concepts.

Develop an equipment modification kit, and design equipment from the ground up that can be more easily modified by the in-house engi-neering teams of product manufacturers.

When initiaing contact with a new prospect, first focus on trying to understand the company philoso-phy and then adjust communication and equipment positioning specifically to that company's needs.

Nutraceutical Pharmaceutical Pharmaceutical

Pharmaceutical

PharmaceuticalPharmaceutical

Pharmaceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Pharmaceutical

Food Food Food

Food

Food Food

Food

NUTRACEUTICALS

FunctionalBeverages

FunctionalFoods

Nutricion-fortifiedFoods

Sports Snacks

Probiotics

Sports and Energy Drinks

Fortified Juices

Glucouse Powders

MealReplacement

Beverages

VitaminSupplements

MineralSupplements

Antioxidants

HerbalExtracts

SpecialtySupplements

(Fish oil, C0-Q10

DietarySupplements

29

39

53

24

2%

11.3%

17.6%

17.9%

29

34

41

47

57

34%

10%

19%

8%

11%18%

Vitamins

Meal Replacement

Herbs and Botanicals

Minerals

Sports Nutrition

Distribution of Nutraceutical Industry Respondents by Employer Type

NutraceuticalCo-packer

5%10%3%

40%34%

8%

Processing/Packaging EquipmentProviders

Nutraceutical Industry Consultant

Nutraceutical Association

Branded NutraceuticalManufacturer

Third-partyNutraceuticalManufacturer

Distribution of Nutraceutical Manufacturers Respondents by Company Revenue

$250M to $500M

12%

8%6%2%

21%

23%18%

10%

$500M to $1B

1B to $5B$5B to $25B

$25B+

$0 to $50M

$50M to $100M$100M to $250M

4%

33%35%

28% 37%

4%

Distribution of Respondents’ Nutraceutical Manufacturers Employers by Type of Nutraceutical

Product Produced

Dietary Supplements

FunctionalFoods

FunctionalBeverages

0

10

20

30

40

50

Categories of Nutraceuticals

Nutraceuticals PharmaceuticalsFood


U.S. (2011)

200720112015

4%

88

118

167

68

112 118

138

171

89

3%

37%

51%

18%21%

24% 24%

4%3% 3%5%

47%

50%

10%

33%35%

28%

InternationalU.S.



Vitamins & Dietary

Supplements

FunctionalFoods

$ B

illio

ns U

.S.

0

50

100

150

200

2011

2015






200720112015


PETPlastic

HDPEPlastic

Can Glass Pouch

All Beverages


Energy Drinks


Vitamins & Dietary

Supplements

FunctionalFoods

$ B

illio

ns U

.S.

0

10

20

30

40

50

60

Large, Branded



Companies


Food Companies


tier up


High

Moderate

Low



ManufacturingSpeed

$ Value ofProducts




0 5 10 15 20


U.S. (2011)





InternationalU.S.


10

20

30

40

50

0

10

20

30

40

50

3%

50%

10%


InternationalU.S.


10

20

30

40

50


InternationalU.S.


5

10

15

20

25

30

35

0

10

20

30

40

50

60






















Pharmaceutical


Pharmaceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Pharmaceutical

Food Food Food

Food

Food Food

Food

NUTRACEUTICALS

FunctionalBeverages

FunctionalFoods


Sports Snacks

Probiotics


Fortified Juices

Glucouse Powders

MealReplacement

Beverages

VitaminSupplements

MineralSupplements

Antioxidants

HerbalExtracts


(Fish oil, C0-Q10

DietarySupplements

29

39

53

24

2%

11.3%

17.6%

17.9%

29

34

41

47

57

34%

10%

19%

8%

11%18%

Vitamins

Meal Replacement


Minerals

Sports Nutrition



5%10%3%

40%34%

8%







$250M to $500M

12%

8%6%2%

21%

23%18%

10%

$500M to $1B


$25B+

$0 to $50M

$50M to $100M$100M to $250M

4%

33%35%

28% 37%

4%


Product Produced

Dietary Supplements

FunctionalFoods

FunctionalBeverages

0

10

20

30

40

50



Source: Euromonitor, March 2012 and BCC Research 2011E x E c u t i v E s u M M A R y A n D P E R s P E c t i v E


[ 6 ]

china and india had nutraceutical sales of $15 billion and $2 billion respectively in 2010 and are expected to be key growth markets for nutraceu-ticals in the future.

the united states accounted for approximately one-third of the total global nutraceutical market in 2011, and the u.s. market is expected to grow at a rate of about 5.5 percent through 2015. simi-lar to the global market, beverages are expected to lead the u.s. growth in nutraceuticals, albeit at a slower rate of about 8 percent (compared to the global rate of 10 percent) annually through 2015.

the growth in nutraceutical beverages is far out-stripping the growth in beverages as a whole. sales of nutraceutical beverages such as energy drinks and sports drinks grew between six to nine times faster than the 2 percent growth that sales

of beverages overall are experiencing. the materials and types of packaging for nutraceutical beverages are expected to evolve due to the increasing popularity of beverage shots and the anticipated popularity growth of pouches.

NutracEutical FOrmatS

nutraceuticals have traditionally been consumed in pill form. However, as new products proliferate in the market, consumers are showing signs of becoming fatigued with consuming many pills each day. Respon-dents remarked that consumers are now striving to get nutraceutical pill consumption down to just a few pills, or even one, per day. consumers are choosing to consume any additional nutraceuticals through other formats such as beverages, foods, gummies, or beverage shots. Many respondents noted that this industry is particularly exciting because of all the innovation in developing different nutraceutical formats.

NutracEutical drivErS aNd trENdS

While the nutraceutical industry’s sales growth prospects are somewhat hindered by the question of their ef-ficacy and lack of FDA approval, consumers are still gravitating to nutraceuticals to look and feel better and maintain health.

convenience innovations in packaging are spurring growth in specific segments. single-serving dosage packs have been introduced and include pill packs with a variety of pills in a single package, stick packs with powder or gel that can be mixed with water, and beverage shots. All of these types of packaging free consumers from carry-ing around multiple bottles of pills or large, heavy drinks. instead, consumers can easily place single-serving packs in their pockets or bags and consume the product as needed.

PouchesFor functional beverages, pouches − a packaging format suffering from being perceived by u.s. consumers



U.S. (2011)

200720112015

4%

88

118

167

68

112 118

138

171

89

3%

37%

51%

18%21%

24% 24%

4%3% 3%5%

47%

50%

10%

33%35%

28%

InternationalU.S.



Vitamins & Dietary

Supplements

FunctionalFoods

$ B

illio

ns U

.S.

0

50

100

150

200

2011

2015






200720112015


PETPlastic

HDPEPlastic

Can Glass Pouch

All Beverages


Energy Drinks


Vitamins & Dietary

Supplements

FunctionalFoods

$ B

illio

ns U

.S.

0

10

20

30

40

50

60

Large, Branded



Companies


Food Companies


tier up


High

Moderate

Low



ManufacturingSpeed

$ Value ofProducts




0 5 10 15 20


U.S. (2011)





InternationalU.S.


10

20

30

40

50

0

10

20

30

40

50

3%

50%

10%


InternationalU.S.


10

20

30

40

50


InternationalU.S.


5

10

15

20

25

30

35

0

10

20

30

40

50

60






















Pharmaceutical


Pharmaceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Pharmaceutical

Food Food Food

Food

Food Food

Food

NUTRACEUTICALS

FunctionalBeverages

FunctionalFoods


Sports Snacks

Probiotics


Fortified Juices

Glucouse Powders

MealReplacement

Beverages

VitaminSupplements

MineralSupplements

Antioxidants

HerbalExtracts


(Fish oil, C0-Q10

DietarySupplements

29

39

53

24

2%

11.3%

17.6%

17.9%

29

34

41

47

57

34%

10%

19%

8%

11%18%

Vitamins

Meal Replacement


Minerals

Sports Nutrition



5%10%3%

40%34%

8%







$250M to $500M

12%

8%6%2%

21%

23%18%

10%

$500M to $1B


$25B+

$0 to $50M

$50M to $100M$100M to $250M

4%

33%35%

28% 37%

4%


Product Produced

Dietary Supplements

FunctionalFoods

FunctionalBeverages

0

10

20

30

40

50



Source: BCC Research 2011


[ 7 ]

as a type of children’s beverage vehicle − are now being re-introduced with resealable closures and in larger sizes. Both measures, along with additional products from Asian markets, are expected to help foster increas-ing adoption of pouches by American consumers. Many respondents brought up the challenge of sourcing high-quality pouches at good prices in the united states. currently, Asian markets use pouches extensively and are taking advantage of the format’s economies of scale when selling to u.s. manufacturers.

closuresMany products are sold in bottles with tight caps and multi-laminate seals that can be challenging for gen-eral users to remove. Given that older consumers are often heavy users of nutraceuticals, some manufactur-ers have developed specific packaging solutions with new direct seal closures that require significantly less torque, making them much easier to open. Full Body Shrink-sleevesFull body shrink-sleeves are very popular with respondents. Many respondents expect this type of outer label to be on 50 percent of all nutraceutical packaging in the next five years. this type of label offers distinct value to nutraceutical manufacturers such as a very clean, sharp look; maximum space to educate consumers about the product; adequate space to detail product nutrients; and less expense than traditional labels. A few re-spondents urged the use of steam tunnels rather than dry-heat tunnels for finishing, as steam tunnels were perceived to provide the best form-fitting label application.

NutracEuticalS cOmParEd tO FOOd aNd PharmacEuticalS

nutraceuticals are generally defined and perceived as falling somewhere in between food and pharmaceu-ticals. this perception is particularly accurate with respect to the equipment and processes of packaging nutraceuticals.

Many respondents explained that there is a broad hierarchy of manufacturing standards, with pharmaceu-ticals at the top, nutraceuticals second and food third. the spectrum of nutraceutical manufacturing is rela-tively wide, with nutraceuticals manufactured by pharmaceutical companies being managed very similarly to pharmaceutical production. contract manufacturers and small, branded companies often manufacture nutraceuticals and manage equipment to standards similar to the standards used by food companies. the tiers are laid out in the graphic below:



U.S. (2011)

200720112015

4%

88

118

167

68

112 118

138

171

89

3%

37%

51%

18%21%

24% 24%

4%3% 3%5%

47%

50%

10%

33%35%

28%

InternationalU.S.



Vitamins & Dietary

Supplements

FunctionalFoods

$ B

illio

ns U

.S.

0

50

100

150

200

2011

2015






200720112015


PETPlastic

HDPEPlastic

Can Glass Pouch

All Beverages


Energy Drinks


Vitamins & Dietary

Supplements

FunctionalFoods

$ B

illio

ns U

.S.

0

10

20

30

40

50

60

Large, Branded



Companies


Food Companies


tier up


High

Moderate

Low



ManufacturingSpeed

$ Value ofProducts




0 5 10 15 20


U.S. (2011)





InternationalU.S.


10

20

30

40

50

0

10

20

30

40

50

3%

50%

10%


InternationalU.S.


10

20

30

40

50


InternationalU.S.


5

10

15

20

25

30

35

0

10

20

30

40

50

60






















Pharmaceutical


Pharmaceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Pharmaceutical

Food Food Food

Food

Food Food

Food

NUTRACEUTICALS

FunctionalBeverages

FunctionalFoods


Sports Snacks

Probiotics


Fortified Juices

Glucouse Powders

MealReplacement

Beverages

VitaminSupplements

MineralSupplements

Antioxidants

HerbalExtracts


(Fish oil, C0-Q10

DietarySupplements

29

39

53

24

2%

11.3%

17.6%

17.9%

29

34

41

47

57

34%

10%

19%

8%

11%18%

Vitamins

Meal Replacement


Minerals

Sports Nutrition



5%10%3%

40%34%

8%







$250M to $500M

12%

8%6%2%

21%

23%18%

10%

$500M to $1B


$25B+

$0 to $50M

$50M to $100M$100M to $250M

4%

33%35%

28% 37%

4%


Product Produced

Dietary Supplements

FunctionalFoods

FunctionalBeverages

0

10

20

30

40

50




[ 8 ]

PackagingProduct packaging is where the nutraceutical industry diverges from the middle ground to more of an ex-treme position. nutraceuticals come in a much wider array of sizes and formats than pharmaceuticals. From the 24-inch tall jug of protein shake powder to a pixie stick of powder, and from lounge tabs to dosage caps, the possibilities for and practice of packaging nutraceuticals are daunting for many companies. these types of packaging challenges encourage manufacturers to outsource production or at least acquire machinery with flexibility and fast changeover speeds as key attributes.

Packaging Equipmentin terms of packaging equipment, pharmaceutical companies clearly stand out from nutraceutical and food companies in the following ways:

1. Pharmaceutical companies must validate their equipment through multiple steps, including factory ac-ceptance tests and site acceptance tests.

2. they invest heavily in inspection equipment, such as cap inspection machines to verify that caps are on correctly, and vision systems to verify that tablet counts and label, lot, and date codes are accurate.

3. they eliminate allergens and contaminants with equipment that has no exposed gears or belts, no chain drives, little to no use of grease, and covers of some type for all moving pieces to minimize accumulation of dust.

Depending on the whether or not the nutraceutical manufacturer is also a food or pharmaceutical company, it may adhere to these practices in varying degrees, whereas food manufacturers will follow these practices less closely.


Packaging Processes the vast array of packaging sizes and the abundance of different companies and products mean that nutra-ceutical production usually involves significantly more changeovers than production of either pharmaceuticals or food. nutraceutical manufacturers therefore typically choose equipment that has universal change parts that are easy to adjust for different packaging sizes, but usu-ally reduce their production speed dramatically. Because there is so much changeover for most nutraceutical manufacturers, companies often provide ongoing main-tenance to the machines while they are doing change-over work, to minimize the need for shutting down the lines again for longer term maintenance.

Food companies are usually at the other end of this spectrum. Most often they have very long production runs with very little changeover. these companies use dedicated change parts that are far more expensive but


[ 9 ]

designed for high speed. Maintenance is done after long intervals of production, and lines are only stopped during runs if there is a significant issue.

Pharmaceutical companies stand out in that the maintenance of machines is taken extremely seriously. the machines are expected to be running perfectly, as if they were brand new. Any slight variance from how a machine should be running will result in a shut down and immediate fixing of the line. Pharmaceutical com-panies invest heavily in spare parts inventory so if a part breaks down, it could be replaced immediately to have only minimum impact on production schedules.

the co-mingling of nutraceutical manufacturing operations with food or pharmaceuticals is generally not practiced. not only are the manufacturing philosophies very different, the need to carefully control for aller-gens and cross-contamination forces companies to manufacture these different kinds of products in different rooms at a minimum and often in different plants.

rEgulatiON

the Food safety Modernization Act (FsMA) does not ap-ply to “fully compliant” dietary supplement/nutraceutical companies. the status of “fully compliant” is determined only after the manufacturer passes an FDA audit.

Most respondents believe that the FDA will likely become more involved in regulating nutraceuticals in the near fu-ture as the regulatory body is trying to implement new Dietary ingredient (nDi) guidance for the supplement in-dustry. the Alliance for natural Health estimates that up to 30,000 nutritional supplements will be removed from the marketplace if the nDi draft is approved. this is clearly a controversial issue for respondents, with one view high-lighting the industry’s lack of legitimacy without proof of efficacy (as determined in the pharmaceutical industry) and the reputational risk the entire industry is exposed to by nutraceutical manufacturers that take certain manufacturing or marketing risks. smaller companies tend to be on the other side of the issue – not welcoming increased FDA scrutiny – because they fear the higher barriers to entry and/or believe that consumers should make their own decisions rather than being limited by the FDA.

FDA regulation is seen as likely to cause considerable industry consolidation of many smaller nutraceutical players.



[ 1 0 ]


U.S. (2011)

200720112015

4%

88

118

167

68

112 118

138

171

89

3%

37%

51%

18%21%

24% 24%

4%3% 3%5%

47%

50%

10%

33%35%

28%

InternationalU.S.



Vitamins & Dietary

Supplements

FunctionalFoods

$ B

illio

ns U

.S.

0

50

100

150

200

2011

2015






200720112015


PETPlastic

HDPEPlastic

Can Glass Pouch

All Beverages


Energy Drinks


Vitamins & Dietary

Supplements

FunctionalFoods

$ B

illio

ns U

.S.

0

10

20

30

40

50

60

Large, Branded



Companies


Food Companies


tier up


High

Moderate

Low



ManufacturingSpeed

$ Value ofProducts




0 5 10 15 20


U.S. (2011)





InternationalU.S.


10

20

30

40

50

0

10

20

30

40

50

3%

50%

10%


InternationalU.S.


10

20

30

40

50


InternationalU.S.


5

10

15

20

25

30

35

0

10

20

30

40

50

60






















Pharmaceutical


Pharmaceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Pharmaceutical

Food Food Food

Food

Food Food

Food

NUTRACEUTICALS

FunctionalBeverages

FunctionalFoods


Sports Snacks

Probiotics


Fortified Juices

Glucouse Powders

MealReplacement

Beverages

VitaminSupplements

MineralSupplements

Antioxidants

HerbalExtracts


(Fish oil, C0-Q10

DietarySupplements

29

39

53

24

2%

11.3%

17.6%

17.9%

29

34

41

47

57

34%

10%

19%

8%

11%18%

Vitamins

Meal Replacement


Minerals

Sports Nutrition



5%10%3%

40%34%

8%







$250M to $500M

12%

8%6%2%

21%

23%18%

10%

$500M to $1B


$25B+

$0 to $50M

$50M to $100M$100M to $250M

4%

33%35%

28% 37%

4%


Product Produced

Dietary Supplements

FunctionalFoods

FunctionalBeverages

0

10

20

30

40

50



Source: Primary Research

EquiPmENt SuPPliEr ExPEctatiONS

nutraceutical manufacturers are looking for packag-ing equipment that is fast, flexible, and easy to use. Machine operators have varying education levels, so easy-to-understand and intuitive user interfaces are critical in keeping production volumes high. With so many changeovers required, respondents under-scored the need for machines that are very quick and simple to clean.

some other factors that respondents are looking for, but which were mentioned less often, are machines that are designed 1) in modular systems, 2) to elimi-nate (or at least minimize) the need for humans to touch the product, and 3) with as many nonpropri-etary parts as possible.

cONtract aNd iNtErNatiONal maNuFacturiNg

As illustrated in the graph (top), contract manufacturers handle nearly two-thirds of all nutra-ceutical manufacturing. nearly half of all contract-manufactured nutraceutical products sold in the united states are manufactured internationally.

However, as illustrated in the graph (bottom), with respect to contract packaging, a much larger por-tion is done in the united states because of the additional expense of transporting fully-packaged products on ships.


U.S. (2011)

200720112015

4%

88

118

167

68

112 118

138

171

89

3%

37%

51%

18%21%

24% 24%

4%3% 3%5%

47%

50%

10%

33%35%

28%

InternationalU.S.



Vitamins & Dietary

Supplements

FunctionalFoods

$ B

illio

ns U

.S.

0

50

100

150

200

2011

2015






200720112015


PETPlastic

HDPEPlastic

Can Glass Pouch

All Beverages


Energy Drinks


Vitamins & Dietary

Supplements

FunctionalFoods

$ B

illio

ns U

.S.

0

10

20

30

40

50

60

Large, Branded



Companies


Food Companies


tier up


High

Moderate

Low



ManufacturingSpeed

$ Value ofProducts




0 5 10 15 20


U.S. (2011)





InternationalU.S.


10

20

30

40

50

0

10

20

30

40

50

3%

50%

10%


InternationalU.S.


10

20

30

40

50


InternationalU.S.


5

10

15

20

25

30

35

0

10

20

30

40

50

60






















Pharmaceutical


Pharmaceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Pharmaceutical

Food Food Food

Food

Food Food

Food

NUTRACEUTICALS

FunctionalBeverages

FunctionalFoods


Sports Snacks

Probiotics


Fortified Juices

Glucouse Powders

MealReplacement

Beverages

VitaminSupplements

MineralSupplements

Antioxidants

HerbalExtracts


(Fish oil, C0-Q10

DietarySupplements

29

39

53

24

2%

11.3%

17.6%

17.9%

29

34

41

47

57

34%

10%

19%

8%

11%18%

Vitamins

Meal Replacement


Minerals

Sports Nutrition



5%10%3%

40%34%

8%







$250M to $500M

12%

8%6%2%

21%

23%18%

10%

$500M to $1B


$25B+

$0 to $50M

$50M to $100M$100M to $250M

4%

33%35%

28% 37%

4%


Product Produced

Dietary Supplements

FunctionalFoods

FunctionalBeverages

0

10

20

30

40

50



Source: Primary Research



[ 1 1 ]


U.S. (2011)

200720112015

4%

88

118

167

68

112 118

138

171

89

3%

37%

51%

18%21%

24% 24%

4%3% 3%5%

47%

50%

10%

33%35%

28%

InternationalU.S.



Vitamins & Dietary

Supplements

FunctionalFoods

$ B

illio

ns U

.S.

0

50

100

150

200

2011

2015






200720112015


PETPlastic

HDPEPlastic

Can Glass Pouch

All Beverages


Energy Drinks


Vitamins & Dietary

Supplements

FunctionalFoods

$ B

illio

ns U

.S.

0

10

20

30

40

50

60

Large, Branded



Companies


Food Companies


tier up


High

Moderate

Low



ManufacturingSpeed

$ Value ofProducts




0 5 10 15 20


U.S. (2011)





InternationalU.S.


10

20

30

40

50

0

10

20

30

40

50

3%

50%

10%


InternationalU.S.


10

20

30

40

50


InternationalU.S.


5

10

15

20

25

30

35

0

10

20

30

40

50

60






















Pharmaceutical


Pharmaceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Pharmaceutical

Food Food Food

Food

Food Food

Food

NUTRACEUTICALS

FunctionalBeverages

FunctionalFoods


Sports Snacks

Probiotics


Fortified Juices

Glucouse Powders

MealReplacement

Beverages

VitaminSupplements

MineralSupplements

Antioxidants

HerbalExtracts


(Fish oil, C0-Q10

DietarySupplements

29

39

53

24

2%

11.3%

17.6%

17.9%

29

34

41

47

57

34%

10%

19%

8%

11%18%

Vitamins

Meal Replacement


Minerals

Sports Nutrition



5%10%3%

40%34%

8%







$250M to $500M

12%

8%6%2%

21%

23%18%

10%

$500M to $1B


$25B+

$0 to $50M

$50M to $100M$100M to $250M

4%

33%35%

28% 37%

4%


Product Produced

Dietary Supplements

FunctionalFoods

FunctionalBeverages

0

10

20

30

40

50



Perspective

the prospect of potential FDA regulation of nutraceuticals places a cloud of uncertainty over the future of nutraceutical manufacturers and packaging equipment suppliers. Either way, equipment manufacturers will be significantly impacted.

FDA regulation will likely bring a period of slower equipment sales as companies figure out how to adjust to the new environment. Additionally, consolidation will likely reduce the number of products being sold, and will therefore lead to a reduction in the variety of packaging. the challenges of constant changeover may recede and batch sizes may increase as companies focus on producing and marketing only the prod-ucts that are currently proven to be scientifically efficacious. consolidated companies may do more of their production in-house as this may make more economic sense.

the table below lays out some of the potential impacts of regulation and some next steps to consider.

On the other hand, without FDA regulation, nutraceutical packaging will continue in the direction it is currently going. Product proliferation will continue, and contract manufacturers will serve an increasing number of entrepreneurs and their increasingly segmented consumer groups with shorter production runs. Packaging innovation will likely accelerate as companies seek differentiation. this will likely drive an in-creasing percentage of production into the hands of contract manufacturers.



[ 1 2 ]

the table below specifies some of the potential impacts if regulation does not occur, as well as some next steps to consider.


U.S. (2011)

200720112015

4%

88

118

167

68

112 118

138

171

89

3%

37%

51%

18%21%

24% 24%

4%3% 3%5%

47%

50%

10%

33%35%

28%

InternationalU.S.



Vitamins & Dietary

Supplements

FunctionalFoods

$ B

illio

ns U

.S.

0

50

100

150

200

2011

2015






200720112015


PETPlastic

HDPEPlastic

Can Glass Pouch

All Beverages


Energy Drinks


Vitamins & Dietary

Supplements

FunctionalFoods

$ B

illio

ns U

.S.

0

10

20

30

40

50

60

Large, Branded



Companies


Food Companies


tier up


High

Moderate

Low



ManufacturingSpeed

$ Value ofProducts




0 5 10 15 20


U.S. (2011)





InternationalU.S.


10

20

30

40

50

0

10

20

30

40

50

3%

50%

10%


InternationalU.S.


10

20

30

40

50


InternationalU.S.


5

10

15

20

25

30

35

0

10

20

30

40

50

60






















Pharmaceutical


Pharmaceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Pharmaceutical

Food Food Food

Food

Food Food

Food

NUTRACEUTICALS

FunctionalBeverages

FunctionalFoods


Sports Snacks

Probiotics


Fortified Juices

Glucouse Powders

MealReplacement

Beverages

VitaminSupplements

MineralSupplements

Antioxidants

HerbalExtracts


(Fish oil, C0-Q10

DietarySupplements

29

39

53

24

2%

11.3%

17.6%

17.9%

29

34

41

47

57

34%

10%

19%

8%

11%18%

Vitamins

Meal Replacement


Minerals

Sports Nutrition



5%10%3%

40%34%

8%







$250M to $500M

12%

8%6%2%

21%

23%18%

10%

$500M to $1B


$25B+

$0 to $50M

$50M to $100M$100M to $250M

4%

33%35%

28% 37%

4%


Product Produced

Dietary Supplements

FunctionalFoods

FunctionalBeverages

0

10

20

30

40

50




U.S. (2011)

200720112015

4%

88

118

167

68

112 118

138

171

89

3%

37%

51%

18%21%

24% 24%

4%3% 3%5%

47%

50%

10%

33%35%

28%

InternationalU.S.



Vitamins & Dietary

Supplements

FunctionalFoods

$ B

illio

ns U

.S.

0

50

100

150

200

2011

2015






200720112015


PETPlastic

HDPEPlastic

Can Glass Pouch

All Beverages


Energy Drinks


Vitamins & Dietary

Supplements

FunctionalFoods

$ B

illio

ns U

.S.

0

10

20

30

40

50

60

Large, Branded



Companies


Food Companies


tier up


High

Moderate

Low



ManufacturingSpeed

$ Value ofProducts




0 5 10 15 20


U.S. (2011)





InternationalU.S.


10

20

30

40

50

0

10

20

30

40

50

3%

50%

10%


InternationalU.S.


10

20

30

40

50


InternationalU.S.


5

10

15

20

25

30

35

0

10

20

30

40

50

60






















Pharmaceutical


Pharmaceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Nutraceutical

Pharmaceutical

Food Food Food

Food

Food Food

Food

NUTRACEUTICALS

FunctionalBeverages

FunctionalFoods


Sports Snacks

Probiotics


Fortified Juices

Glucouse Powders

MealReplacement

Beverages

VitaminSupplements

MineralSupplements

Antioxidants

HerbalExtracts


(Fish oil, C0-Q10

DietarySupplements

29

39

53

24

2%

11.3%

17.6%

17.9%

29

34

41

47

57

34%

10%

19%

8%

11%18%

Vitamins

Meal Replacement


Minerals

Sports Nutrition



5%10%3%

40%34%

8%







$250M to $500M

12%

8%6%2%

21%

23%18%

10%

$500M to $1B


$25B+

$0 to $50M

$50M to $100M$100M to $250M

4%

33%35%

28% 37%

4%


Product Produced

Dietary Supplements

FunctionalFoods

FunctionalBeverages

0

10

20

30

40

50



Aside from uncertainty about future FDA action, there are some additional ways to improve sales and ser-vice to the nutraceutical industry. Equipment manufacturers can improve the positioning of their equipment solutions to each industry by better understanding how each industry differs from others across a number of factors. As illustrated below, the food, nutraceutical, and pharmaceutical industries are similar in some ways but dramatically different when looking at a broad array of variables.



[ 1 3 ]

Pharmaceuticals rank high on most of these attributes, whereas food and nutraceuticals tend to rank rela-tively low. though some attributes (such as attention to maintenance) may be heavily driven by FDA regula-tion, others (like spare parts inventory) may be linked to the value of the products manufactured. However, there may be some opportunity to get nutraceutical manufacturers to agree to develop a modest spare parts inventory, or spare part kits for each machine. this would help manufacturers minimize production downtime and having to wait for spare parts, as a number of respondents identified this as a key frustration. Additionally, convenience will likely be a key consumer benefit that manufacturers will continue to seek to address in the nutraceutical industry. Equipment manufacturers can help nutraceutical manufacturers ad-dress this issue by designing equipment that can better handle smaller sizes and innovative closures.


Nutraceutical-ExecutiveSummary.pdf

Documents

s s e s s

c e u t i c

packaging equipment

n d p e r s p e c t

international manufacturing

en u t r

code of ethicse x e

appendix c