With the U.S. economy growing at an anemic 2 percent, there’s one industry that does not have iron poor blood. Niche markets within the larger vitamin and supplement industry are on fire, with some reaching double-digit growth. Although the overall supplements market has been affected by the sluggish economy and occasional regulation issues, it continues to outpace the economy, with hot offerings such as antioxidants and fish oil getting major boosts every time a news story or afternoon doctors’ show gives them a thumbs-up.
Right now there are no companies with a dominating position in this industry, making it something of a wild-west for investors, a little like the computer software industry twenty years ago. Any time a new company comes along with a new approach, it can grab market share by the fistfuls.
As usual, one of the big factors in the growth of any industry is its relation to the still massive boomer generation, an aging market of over 60 million people who are taking health more seriously than they ever did before. The nutritional supplements market will have this steady fire under it for at least another twenty years. But a growing health consciousness, fueled by increasing research and mass communication, has opened the door to every age level, and has helped nutritional supplements shoot well pass the $10 billion mark.
But there’s another reason this is an industry important to consider, and it has nothing to do with good health. The fact is that Big Pharma is rapidly coming to a so-called “patent-cliff,” as a record number of patents begin to expire and generic drug producers are allowed in to crash the party. Regulations and the cost of development have put the squeeze on new drug development as never before, and drug developers are looking for new opportunities.
Food and drug companies are beginning to buy up dietary supplement companies, partly for the revenue and partly to get rid of the competition. Indeed the clout of the pharmaceutical industry in Washington has played a role in a wave of new restrictions on supplements, limiting what can be claimed about them. Nonetheless, these fast-growing companies are being increasingly viewed as tasty takeover targets, which, in the case of publicly traded companies, would represent a windfall for well-positioned investors.