A flipchart in the meeting room at Gee Lawson's head office spells out a series of action points from the latest sales meeting. Alongside lists of prospects are the instructions: 'Speak positively all the time' and 'Be consistent'. This is probably not bad advice to anyone operating in the field of nutraceuticals, especially in the current economic climate.But will consumers carry on buying dietary supplements and functional foods in a recession?
One man certainly hoping so is Jonathan Shorts who, with an 80% stake in the business he runs, has a very personal interest in its financial wellbeing. Shorts, who joined Gee Lawson in 1989 when well over 90% of its business was in fine chemicals and dyes, now stands at the helm of a completely different company. "When I joined, we were doing some business in nutritionals, but it was still seen as a bit wacky.
"But soon after that, it exploded, so we were in the right place at the right time. Today, nutritionals account for 85% of the business and our main customers are contract manufacturers of dietary supplements and, increasingly, manufacturers of sports nutrition products and beverages." The firm now has a central distribution facility in Nottingham, UK, and sales offices in London, Switzerland and Italy.
But can the meteoric growth of the last two decades continue? "It's too early to say how the downturn will affect consumer spending in the medium- to long-term," says Shorts. "But last time we hit a recession, this industry continued to grow. That said, we have seen a softening of sales in some markets lately - although I think a lot of that is down to legislation. People aren't sure how things will play out with the EU Nutrition and Health Claims Regulation, for example."
Loyalty
On the plus side, however, customers who habitually purchase dietary supplements are potentially more loyal than other punters, he observes. For a start, they are not spending purely on impulse; they have bought into the concept of investment in their long-term health. Why else would they spend euro 10-20 a month on a tub of pills to gain a benefit they may not realise for several decades?
Perhaps the more likely scenario is that consumers will still want to invest in their health - they just won't be willing to invest quite as much. And in a market where you really do get what you pay for, this is potentially a worry, says Shorts: "If something is cheaper, there's always a reason. Take adulteration. When we're testing, we're finding that people are not declaring everything that's in there. That concerns me. We spend an inordinate amount of time and money to ensure that materials are what they say they are. With things like gingko biloba extract, we've found that certain manufacturers, primarily in China, have found ways of increasing the bioflavanoid content through adding compounds like quercetin and effectively spiking the material. We will not buy or sell this kind of material."
While responsible companies go out of their way to ensure they are not buying or selling adulterated or poor quality ingredients, says Shorts, "there are others that are simply buying on the basis of a certificate of analysis, who will not test the material and don't want to know.
"We know immediately by the price of a raw material whether or not it is adulterated. Adulterated gingko is actually quite well known; what's less well known is what's happening in the chondroitin market: unless you are thorough with your testing, you can be tricked into buying a non-single species product. Many of the factories in China are producing multi-species product. Unless you know who you're dealing with, you are at risk. And unless people work to internationally approved methods of testing and analysis, it can really cause problems.
"I'm really passionate about this. Quality and safety are critical to this industry, and unfortunately, there are always going to be people who don't take it as seriously as us."
Supplements and snake oil
If consumers are buying products for health reasons, they should be and do exactly what they say on the tin, he says. And with the pressure to make a fast buck, or simply to protect margins, unscrupulous players can take consumers for a ride, he says. "In the early days, we were quite surprised by the tricks that were used by suppliers. You have to know who you're working with, visit them, audit them and ask the right questions.
"Legislation plays a role, but it's very difficult to legislate if someone is going out of their way to trick you. With plant extracts in particular, you have to have a consistent product from the right species that can be characterised. I remember very clearly visiting a so-called extracts house and being asked what colour I would like - which immediately raised the alarm bells. We were being offered a low percentage of the active and a high percentage of maltodextrin."
Other natural products are also fraught with problems, he says, notably the hunger-busting succulent hoodia. "There is a lot of generic rubbish on the market. We decided not to supply hoodia because we couldn't guarantee it was the correct species. There was a huge amount of Chinese hoodia out there, whereas the hoodia that had the evidence behind it was from South Africa."
Building trust
Bilberry is "another classic example", says Shorts, whose product range includes everything from probiotics and 'memory molecule' PS (phosphatidylserine) to a bewildering array of plant-derived ingredients from broccoli extract and pine bark extract to resveratrol from the giant knotweed and Saw Palmetto berries.
"All the scientific studies on bilberry have been done on the European species, but people are out there supplying the Chinese stuff because it's a fifth of the price - but making the same claims. But it bears no resemblance to the European variety. The problem is, consumers just see the word hoodia, or bilberry, and they trust the supplier - and in some cases, that trust is misplaced. It's a real problem in this market, and when times are tough, my concern is that the problem is only going to get worse."
Going back to the flipchart's mantra ('Be consistent'), in such times you have to hold your nerve, says Shorts. "It would be easy to increase trade by providing product of lesser quality, but I won't go down that road."
So what does the future hold? "I'm quite excited by the beverage market," says Shorts. "But we're also talking to several new principles where our pan-European sales team can help them deliver products to the European market."
Technical and quality requirements
But why not just deal direct and cut out middle men like Gee Lawson? "Companies like us exist because we serve a purpose," says Shorts. "Buying raw ingredients isn't easy, especially as the technical and quality requirements become more complex and you are sourcing from all over the world."
For distributors like Gee Lawson that are talking to suppliers in China all the time, for example, potential issues such as the swathe of factory closures in and around Beijing during the Olympics were planned events rather than unexpected nightmares, as they proved to be for many firms, says Shorts.
"Production in lots of factories making vitamins and other food ingredients just stopped overnight, and prices went through the roof in some cases. I'm not saying we got everything right, but we were a lot more prepared than a lot of other people!"