4 Insights From Supply Side West, and Why Our Next Product’s Going to be a Doozy

The nutraceutical industry is heavily organized around two different trade shows.

The first one is called the Natural Products Expo, which is where companies with retail products show off for distributors, grocers, and foodie bloggers devout enough to make the pilgrimmage.

The second is the Supply Side Expo, which is strictly business to business.  It’s where you shop for manufacturers, suppliers, consulting agencies and the like.  At the Natural Products Expo Health Kismet shows up as a vendor.  At Supply Side I went as a customer.

My goals were threefold:

1).  Look for a manufacturer for our next product.

2). Talk to suppliers to get a better handle on sourcing ingredients directly. Prices always change, and there’s always at least 3 different ways to get the same ingredient, but by asking around you can usually get a feel for where your desired ingredient list is going to get expensive.  (And boyyyy, are some of them going to cost us! Yipes!)

3).  To snoop around.  These places are good ways to gossip and share notes with other people in the industry.  A lot of the conversation is guised in a sales pitch, but even with the filter of marketing-speak you can glean a lot of inside information.

The show was mostly a success, but the true results won’t be determined for at least another three months.  There’s a lot of work to be done between now and our next product launch, and this was only the first step.

The whole event lasts 5 days from beginning to end and if you put the pedal to the medal you’re exhausted by the time it’s finished.  The temptation of the bright lights of Vegas also doesn’t help.  7 days is a long time to try and resist the pleasures of the strip.

The whole trip was fabulous and gave me a lot to chew on, but these were the most important take home points.

1). GMO’s Will Be Entirely Removed From the Natural Products Industry within two years.  

The movement to label GMO products will end up being a movement to remove GMO products altogether.

A lot of people will pump their fists if that happened but it doesn’t mean as much as you think.

Regardless of whether or not GMO’s are beneficial, they’re much less prevalent than people think.

Ask yourself:  what percentage of crops at your grocery store are currently grown using transgenic organisms?

All of them?  Everything but organic?

Here’s the surprising answer: practically none.

People have a perception that GMO ingredients are ubiquitous in the food chain but that’s not the case.  The list of crops that currently have GMO varieties is surprisingly small:

• Soy
• Corn
• Cotton
• Canola
• Rapeseed
• Papaya
• Sugar beets
• Squash

That’s it.  That means when you walk down the produce aisle the majority of your choices are already GMO free, and it’ll probably stay that way for a long time.  There are only a handful of new products that are slated to come down the pike in the upcoming years and there will probably be years of red tape to cut through by the time they get approved.  It costs about a billion dollars to develop a GMO crop and for most ingredients it’s simply not worth it to go through all the trouble.

You see more and more products sporting the Non GMO label that looks like this:

Seeing this emblem gives the impression that this makes something “different” but most of these products never had any GMO ingredients to begin with, so it has little relevance.  Almost all GMO ingredients are used for two reasons:

• To feed animals.
• To create oils and additives.  Soybean oil, high fructose corn syrup, etc.

That’s about it.  If you’re careful about the meat you eat and avoid processed foods you’ll be GMO free.  The organic standard also prohibits GMO crops.

What does this mean for someone looking to develop products in the natural products industry?  Not too too much.  It means it’s more difficult to source nootropic ingredients since a lot of them come from soy, and it means adding flavors will become more expensive.  Most flavors are made with corn, and the default is GMO-corn unless you specify otherwise.

Flavors in general are expensive, so if you have a complicated formula then going non-GMO can add up.  Most of the time you have to buy at least $2,000 worth of flavors if you want any at all, and that can go up significantly if you have to use a variety of agents to mask bitter tastes or “boost” something to make it seem sweeter than it really is.

2).  The best manufacturers are hard to find.

I consider myself a good aggrogater of information, but I frequently find myself perplexed by the number of options available to you if you want to get something done in the supplement industry.

When I left the trade floor on Thursday I felt really good about 5 or 6 different companies that I got to talk to……but was surprised that I hadn’t heard of any of them before I got there.

One of the difficulties in being a small company is that it’s very difficult to find a manufacturer that’s simultaneously flexible enough to work around your needs but still legitimate.  The easiest manufacturers to find are usually very large with expensive AdWords accounts.  They have incredibly impressive booths at events like these, but often have a rigid screening process for qualifying their customers and usually don’t want to talk to you unless you can order 10,000 bottles.

They can give you everything you need……..if you have a $50,000 dollar product development budget.  I often have a difficult time getting an e-mail response acknowledging I exist, let alone an actual quote on a product.

If you’re independent you can’t afford to do one-stop shopping.  You have to break down the supply chain item-by-item to make sure you’re getting a deal and working in units that are manageable for you.  This is the best education you could possibly get paid for, but it can be maddening at times.

The process is a lot like dating.  You’re a little timid at first, and you have to go through a “get-to-know-you” period to find out if you’ll be comfortable working together.  It’s good to be diligent and outgoing……but never in a rush.  The whole process is fragile, and a pebble can turn into a avalanche if you’re not careful.

And once you sign the contract, the courtship will often feel like a marriage.  Bound together, til’ death do you part.

And just like courting the opposite sex, it usually ends up that like attracts like.  Big expansive manufacturing firms like big expansive businesses to make pills for.   Small mom-and-pop mixing facilities like dealing with young new startups.  If you tell the latter you’re looking to start with a 500 bottle test run you’re not met with an “I-fart-in-your-general-direction” disdain for your lack lack of scale.

If you’re a small company the challenge is to seek these companies out, but like you, they’re also limited by their size.  The great news is that if you find them you can move a lot faster than with your typical manufacturing firm.  The person you speak with is often an owner of the company or someone who works directly in the manufacturing process, not a sales agent who’s going to load your business card into salesforce and put you in a queue.

3).  Our next product’s going to be difficult to engineer.  

Our current products are different riffs on the same motif:  fruit and vegetable powders recombined to promote different health goals.  Our next product, Incredible Mood, will also be a powder, but its ingredient stack is going to be more targeted.

Its formulation starts with clinical research on what ingredients actually move the needle for helping people alleviate depression and anxiety, and works backwards from there.  A lot of the specifics are covered in a previous post I’ve written on the topic.

That’s really exciting, but it entails a more pharmaceutical approach towards product development.  It’s all but impossible to harm yourself with wheatgrass powder.  But getting too much St. John’s Wort can be a problem.  That means more testing, a greater precision in sourcing, and a much larger number of things that can get messed up.

Almost every mood regulating product comes in capsule form.  Capsules are convenient, but they don’t give you a lot of space to get the actives necessary to really get people from point A to point B.  There are a number of important ingredients for mood regulation that require a dosage of 500 mg or more, and some of them in much larger quantities than that.

So you can either do 12 capsules per serving or go with a powder.  We’re gonna gun for the powder.

But powders are tricky.  They get exposed to more air, they have to dissolve in water, and people actually have to like the way they taste.

It looks like the seedling version of Incredible Mood is going to come with the following obstacles:

• It might not make it 30 days without spoiling.
• It might feel like dish detergent in your mouth
• It might taste like metallic filings.  Yuck!

None of those are qualities you want in something you put in your mouth.  Stability tests, small pilot studies, and finding ways to rearrange ingredients in ways they’ve never been rearranged before are all going to be necessary.  Up until this point our product development process has been blissfully devoid of consultants sporting metro-sexual haircuts and expensive suits, but I’m afraid that run of luck might come to an end in 2015.

Say a prayer for us.

And if the engineering part wasn’t enough……

4).  Incredible Mood is going to be tricky to source.  

When it comes to vitamins and minerals, small differences in form can mean big differences in how it’s used by your body.

The differences between nutrient forms is imperceptible to most customers, but it’s often the difference between good and bad.

Neither Incredible Greens, Incredible Berries, or the Purple Dragon have vitamin and mineral add-ins.  Vitamin and mineral add-ins don’t usually work as intended and the process of stripping nutrients out and then adding them back in isn’t conducive to bio-availibility.  However, because mood regulation is directly tied to nutrient deficiencies like magnesium, b vitamins, iodine, and vitamin D, having them will be necessary to make things click.

So that brings you to the messy business of mixing and matching the right forms of each vitamin that’ll actually work in your body like they ought to.  In this domain the difference between “mediocre but cheap” and “good but expensive” is VAST.

Folic acid is a great example.  It’s not the same thing as folate, which is what your body actually uses.  Folate has a methyl group attached to it, which is what allows it to do useful things in your body.  It works together with vitamin B6 and B12 to help your brain produce a substance called sam-E, which is very important for serotonin production. (Serotonin is the chemical that makes your brain happy).

Folic acid has to go through your liver before it can be used by the rest of the body.  For most people this is fine, and supplemental folic acid is actually digested with a higher efficacy than folate found in food.  However, between 20-50% contain at least one copy of an abnormal gene for folic acid metabolism which prevents them from getting folic acid through the liver very efficiently.

For these people folic acid has no effect on the body and can even be detrimental if taken in large quantities for long periods of time.  You don’t want too much free folic acid floating around in your body.

Folic acid is cheap to manufacture.  Folate is not.  If you want to buy manufactured folate you have two choices: quatrefolic acid or metafolin.  Both are under patent and therefore very expensive.

Folic acid costs about $300 kilo.  Folate costs about $13,500.  That’s quite a difference.

So navigating through this process to find the best way to get this stuff done is tricky.  The easy way is the cheap way is the ineffective way.  That’s why most vitamins don’t work.

Onwards and upwards.