5 Opportunities in the Nutritional Supplements Industry · Source: L.E.K. Health and Wellness Consumer Survey (February 2018) 2 0 4 6 8 10 12 Convenience store Healthy grocer Gym

Opportunities in Nutritional SupplementsExecutive Insights

5 Opportunities in the Nutritional Supplements Industry

Nutritional supplements play a key role in the lives of U.S. adult consumers interested in health and wellness (H&W). Within this segment, they spend, on average, a reported $635 on nutritional supplements each year: $433 on vitamins, minerals and herbal supplements (VMS), and $202 on sports nutrition products. And yet, within both categories, there is still room for further growth.

That’s according to the third installment of a biennial survey L.E.K. Consulting conducted on the healthy living marketplace — in this case, on nutritional supplements. Indeed, when asked about their prior month’s purchases, just 55% of consumers who make H&W a priority said they bought VMS, and only 25% had purchased sports nutrition products. In other words, for retailers and brands there are some significant opportunities — and even a lurking threat — to be found.

5 Opportunities in the Nutritional Supplements Industry was written by Alex Evans and Maria Steingoltz, Managing Directors in L.E.K. Consulting’s Consumer Products practice. Alex is based in Los Angeles and Maria is based in Chicago.

For more information, contact [email protected].


Opportunity No. 1: Sports nutrition

2018 Health & Wellness Survey Analysis2

Protein powders, protein bars, energy gels and other so-called active nutrition products have garnered a lot of attention lately. But sports nutrition continues to lag behind that of the more broadly adopted VMS category. Overall, H&W consumers are engaging with sports nutrition products a little more than half (56%) as often as they do VMS products each week. Engagement is highest with millennials, at 72%, whereas at just 33%, baby boomers present the biggest opportunity.

Source: L.E.K. Health and Wellness Consumer Survey (February 2018)

0

20

40

60

80

100%

Millennials Gen Xers Boomers+ Overall

84

61

90

56

95

31

89

50

Take a vitamin, mineral or herbal supplement Consume sports nutrition supplements

0.620.72 0.33 0.56Ratio of sportsnutrition/VMS

Weekly nutritional supplements engagement

Percentage that engage in activity at least once a week1




Meanwhile, annual spending on sports nutrition vs. VMS across generations comes in at just 47%.


0

100

200

300

400

500

600

$700

Millennials Gen Xers Boomers+ Overall

Sports nutrition products Vitamins, minerals or herbal supplements

$86K$67K $69K $75KAvg. Income

$8$8 $9 $9$ spending per$1,000 income

0.490.75 0.24 0.47Ratio of sportsnutrition/VMS

244

567

677

323455

222

657

128

529

635

202

433

Sports nutrition and VMS products spend

Average spend per person per year2




Add to that a lack of mainstream brands — and the fact that many of them, such as GNC and Kirkland, are channel-affiliated — and it becomes clear that, despite recent growth, significant runway for sports nutrition remains.

Sports nutrition brands purchased in the past month

Percentage of responses3


0

20

40%

Cyt

ospo

rt/C

ytom

ax

Perf

orm

ix

Dym

atiz

e

Sciv

atio

n

Mus

cle

Milk

Ove

rall

aver

age

GN

C

Vita

min

Sho

ppe

Her

balif

e

Kirk

land

Opt

imum

Nut

ritio

n

Veg

a

EAS

MET

-Rx

Six

Star

Org

ain

Plan

tFus

ion

Mus

cleP

harm

Cel

luco

r

BPI S

port

s

31

29

1615

10

7 7 76

5 4 3 3 2 2 2 21 1


As a retail channel, Amazon has become a leader in both VMS and sports nutrition. It’s the preferred channel across all consumer segments overall, driven by both millennials and Gen Xers. As such, when it comes to allocating resources, brands need to treat Amazon as a stand-alone channel and not just another retailer.

Opportunity No. 2: Amazon

Preferred channels for nutraceutical purchases by consumer segment*

Percentage of respondents4

2018 Health & Wellness Survey Analysis

*Weighted based on stated spend; **Other includes independent distributors, “nutrition box” suppliers, fitness centers and other stores; *** .com stores included in relevant categories Source: L.E.K. Health and Wellness Consumer Survey (February 2018)

5

0

20

40

60

80

100%

Gen Xers Boomers+ OverallMillennials

1

Non-Amazon online***

Traditional grocer

Drugstore

Other**

Convenience store

Healthy grocer

Specialty nutrition store

Mass merchant/warehouse

Amazon

18

7

32

6

24

23

5

17

7

6

4

16

1323

30

28

6

4

8

17

17

20

23

2934

7

2113


Impulse and convenience are powering the convenience store channel for nutritional supplements; convenience stores significantly over-index for actual purchases vs. stated preferences compared with other channels. VMS and sports nutrition brands should take advantage of that dynamic by working to develop the convenience store channel more fully.

Opportunity No. 3: Convenience stores


Channel power index

Ratio of % purchased in past month to % selected as preferred retailer5


2

0

4

6

8

10

12

“Nut

ritio

n bo

x”su

bscr

iptio

n

Con

veni

ence

sto

re

Hea

lthy

groc

er

Gym

or

stud

io

Trad

ition

al g

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r

Non

-Am

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Loca

l hea

lthfo

od s

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pend

ent

dist

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Mas

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Nat

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s

11.5

5.9

4.84.3

3.7 3.5 3.4 3.4 3.1 3.0

2.1 1.9 1.8

While few respondents selectedconvenience stores as their

preferred retailer for VMS products,a high percentage purchased VMSproducts there in the past month


Opportunity No. 4: Personalized nutrition programs


When it comes to getting nutrition solutions tailored just for them, 59% of millennials and 55% of Gen Xers express interest (see figure) — and 37% of our survey respondents say they’d be willing to pay for such a program as long as the price was “reasonable.” With millennials in particular, this is win-win, as the younger they are, the longer the time horizon is for having them as a customer. As to what a personalized program consists of, an exercise plan, home delivery of a selection of personalized nutritional supplements and an online health tracker topped the list. In other words, any healthy living program needs to offer not just convenience but a holistic set of solutions.

Interest in a personalized nutrition program6

Percentage of respondents selecting 1–7*

*Where 1 is not interested at all and 7 is very interested Source: L.E.K. Health and Wellness Consumer Survey (February 2018)

0

20

40

60

80

100%

Boomers+ OverallMillennials Gen Xers

55%59% 34% 49%% selecting 6-7

3

4

5

1

2

6

7


Opportunity No. 5: Needs-based messaging


Compared with the average consumer, H&W-focused consumers cite different reasons for choosing certain shopping channels over others: Social responsibility, lifestyle fit and degree of appropriateness for serious athletes — in addition to quality — outweigh issues such as cost and convenience. To appeal to the H&W market, brands should align their key messaging with the factors that resonate most deeply with that group of consumers.

*Spend-weighted data Source: L.E.K. Health and Wellness Consumer Survey (February 2018)

Top 3 reasons for shopping channels*

Ratio of core + adjacent/peripheral7

Ano

nym

ous

Best

for

ser

ious

ath

lete

s

Soci

al e

xper

ienc

e

Soci

ally

res

pons

ible

Cus

tom

ized

sel

ectio

n

Best

pro

duct

s fo

r m

y ag

e

Can

’t f

ind

else

whe

re

Hel

pful

cus

tom

er s

ervi

ce

I alre

ady

have

an

acco

unt

Go-

to s

tore

for

pro

duct

Easy

to

brow

se

Fits

my

lifes

tyle

Firs

t de

stin

atio

n

Clo

se t

o ho

me/

offic

e

I get

fre

e on

line

ship

ping

Broa

dest

sel

ectio

n

Alre

ady

shop

the

re

Trus

t th

e re

taile

r

Low

est

pric

es

Hig

hest

-qua

lity

prod

ucts

0

1

2

3

4

5

6

7

Bottom six answersall relate to cost and

convenience issues thatare of less concern to core

and adjacent segments

1.3 1.20.9 0.80.8 0.7 0.5

0.90.5

3.2

1.7

2.8

1.41.6 1.4

4.5

6.8

3.8

1.41.4


While consumers of all ages are already making nutritional supplements a part of their everyday lives, the market is far from saturated. From sports nutrition to convenience stores to personalized nutrition programs, there are opportunities to be found both for brands and retailers. By capitalizing on these opportunities, brands and retailers stand to not only gain market

share and grow their top line, but to also better position themselves to stave off threats such as Amazon, whose branded VMS efforts have already gained notable traction among the H&W crowd. Indeed, while Amazon has not yet made a strong branded play in sports nutrition, there’s no reason it can’t or won’t at some point down the road.

1Survey question 15: How often do you typically do the following activities? (N=1,635)

2Survey question 6: In the past month, approximately how much have you spent on each of the following goods/services? (N=1,635)

3Survey question 31: Which, if any, of the sports nutrition companies/brands listed below have you purchased in the past month? (N=522)

4Survey question 34: Which of the following type of retailer do you consider to be your preferred retailer type for purchasing nutritional supplements? (N=924)

5Survey question 33: In the past month, which of the following retailers have you purchased nutritional supplements from? (N=924)/Survey question 34: Which of the following type of retailer do you consider to be your preferred retailer type for purchasing nutritional supplements? (N=924)

6Survey question 38: What is your interest in a personalized nutrition program providing nutrition recommendations specifically tailored for you as an individual? (N=924)

7Survey question 35: You indicated that you prefer to purchase your nutritional supplements from [X]. What are the top reasons you choose to purchase nutritional supplements from this type of retailer? Select up to three reasons. (N=924)

Key Considerations


Endnotes


About L.E.K. Consulting

L.E.K. Consulting is a global management consulting firm that uses deep industry expertise and rigorous analysis to help business leaders achieve practical results with real impact. We are uncompromising in our approach to helping clients consistently make better decisions, deliver improved business performance and create greater shareholder returns. The firm advises and supports global companies that are leaders in their industries — including the largest private- and public-sector organizations, private equity firms, and emerging entrepreneurial businesses. Founded in 1983, L.E.K. employs more than 1,200 professionals across the Americas, Asia-Pacific and Europe. For more information, go to www.lek.com.

L.E.K. Consulting is a registered trademark of L.E.K. Consulting LLC. All other products and brands mentioned in this document are properties of their respective owners. © 2018 L.E.K. Consulting LLC

About the AuthorsAlex Evans, CFA, is a Managing Director and Partner in L.E.K. Consulting’s Los Angeles office. Alex focuses on consumer-facing sectors encompassing both retail and media. He specializes in a diverse set of verticals including health and wellness, direct selling, specialty retail, sports, television, film and OTT/DTC digital services. Alex advises corporate and private equity clients on a range of issues, including corporate strategy, new business development, channel strategy, pricing/promotion strategy, international expansion, organizational structure, profit improvement and M&A.

Maria Steingoltz is a Managing Director and Partner in L.E.K. Consulting’s Chicago office. Maria is focused on the Retail and Consumer Products practices, with a special focus on food and beverage as well as on beauty and personal care. She advises clients on a range of strategic issues, including growth strategy, new market entry, customer-centric strategy, pricing, consumer segmentation and M&A.

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5 Opportunities in the Nutritional Supplements Industry · Source: L.E.K. Health and Wellness Consumer Survey (February 2018) 2 0 4 6 8 10 12 Convenience store Healthy grocer Gym