Bioactives become serious business

Vitaco chief executive Sarah Kennedy says turnover has been growing despite the recession. Photo / Richard Robinson

"Your joints are very dry," tut-tutted the osteopath. "You should be taking glucosamine and chondroitin."

Until that day I had regarded health supplements as little better than expensive snake oil. But I had made an emergency dash to the practitioner with a crippling neck problem and I was willing to give anything a go.

After a couple of weeks of taking one capsule daily, my neck felt better than it had in years. I was a convert.

It is this kind of growing acceptance of dietary supplements as a means of treating chronic conditions or preventing illness that has seen the New Zealand bioactives sector, as it's termed, burgeon into a serious domestic and export business.

A recent report by consulting firm L.E.K. shows that in 2007 the sector reached annual revenues of $760 million. That was up from around $350 million in 2004, says Michelle Palmer, executive director of industry group Natural Products New Zealand, and means the industry is on track to achieving its target of $1 billion in revenue by 2013.

She says that at this size it begins to nip at the heels of the wine industry - expected to achieve $1 billion in exports this year - and is larger than the biotechnology and organics sectors put together. Palmer says there is talk that in 2009 the industry may already be close to the magic $1 billion and so "I'm about to shift that target to become a $5 billion industry by 2025".

Vitaco Health, owner of the Healtheries and Nutralife brands, is confident enough in the industry's future that it has just invested $25 million in a state-of-the-art plant at its East Tamaki site. It was officially opened by the Prime Minister this week. Chief executive Sarah Kennedy says turnover has been growing at about 10 per cent a year. While not recession-proof, the sector has been "far less discrectionary than we thought it would be".

She believes there's an element of people wanting to take control of their lives in unsettled times. "It's, 'I can't afford to get sick, I don't want to go to the doctor, that's expensive'."

Ageing baby boomers wanting to keep a spring in their step are boosting consumption of products such as fish oil, which promotes mental acrity among other things, and joint treatments such as glucosamine. "To be unhealthy can destroy your retirement," Kennedy says.

Vitaco is a large producer and exporter of green lipped mussel products, an anti-inflammatory ingredient unique to New Zealand. The company turns over around $175 million a year and 60 per cent of its production is exported. It employs 50 people in Australia, its largest export market.

Colostrum, produced by New Zealand's clean, green pasture-fed dairy herd, is also a big export product. "We really leverage off what we would call 'New Zealand Inc'," Kennedy says.

While Vitaco's grocery items such as snacks, herbal teas and sports nutrition products are not considered part of the bioactives sector, it's a big growth area.

Concern over childhood obesity has boosted the popularity of its Kidscare healthy lunchbox snacks range, and sports nutrition products such as protein bars have been growing in "double digits", she says.

While winter always sees an increase in demand for immune support supplements, North Shore-based Good Health says swine flu helped push sales of its product Viralex up 86 per cent in March and April. A smaller company with turnover of $20 million, CEO Paul O'Brien also reports 10 per cent overall annual growth with exports increasing at the greatest rate.

Good Health sends over half of its production offshore. Korea, China and Taiwan are its main customers but other Asian markets are growing rapidly. In the past nine months the company generated new sales of just under $1 million in Indonesia through multi-level marketing.

O'Brien says there is a shift towards a "wellness" model of health as opposed to treating illness with traditional pharmaceuticals. "The vibe I hear from people is they would rather a natural health option for a long term treatment."

At home high profile naturopaths such as Lani Lopez and much improved scientific evidence have helped legitimise the industry.

O'Brien believes naturopathic products can still go much more mainstream. In conjunction with Massey and Auckland Universities, Good Health is about to start a world-first study of 300 school children looking at how fish oil aids brain development.

Previously only children with learning difficulties have been studied. "If this works I'm going to be an absolute pioneer of research, and I'm going to commission trial after trial to legitimise these products."

However, Murray Hardy, director of health supplements retail chain Hardy's, says the industry's recent successes are more of an export story as business domestically is flat. "My take on it would be [that] last year's figures or above would be doing well."

Many customers are on a programme of supplements and continue to buy the basics, but in these recessionary times "they're probably not buying that third or fourth product". However, it remains a growth industry and Hardy's is planning further expansion when the time is right.

Palmer says anyone with a uniquely New Zealand product or ingredient is well poised. She cites the example of Nelson company Forest Herbs Research which has become the leading supplier to Italy of a locally grown anti-candida ingredient.

The L.E.K. report identified certain barriers to growth. While New Zealand's image of supplying pure natural ingredients is a bonus, we lack a regulatory framework that is compatible with and recognised by our key trading partners. Registration of new products was lightly regulated in this country, compared with other sectors such as biotechnology, the report said.

Also a lack of co-ordinated innovation and commercialisation support leads to doubling up, Palmer says. Natural Products New Zealand aims to become one-stop-shop for information.

"A lot of companies are reinventing the wheel, and they're all going off into a certain market and having to do the research about the regulations of the importing country and how they can get their products into the distribution channels. So it's going to take both investment from government and individual companies and us as the national industry body."

NATURALLY HEALTHY

* The New Zealand bioactives sector is worth at least $760 million a year
* This is more than the organics and biotechnology sectors put together
* It's on track to achieving $1 billion in revenue by 2013
* In comparison the New Zealand wine industry will hit $1 billion in exports this year
* Popular products include:
- Fish oil for brain performance
- Glucosamine for joints
- Immune support supplements
- Anti-inflammatory green lipped mussel extract
- Dairy extract colostrum