According to Research and Markets, the global dietary supplement market is expected to grow at a compounded annual growth rate of 6.3% from 2022 to 2030. The market is expected to reach $620.8 billion by 2030. Renewed consumer focus on personal accountability for their health during the global pandemic helped to fuel this growth – and the private equity sector has taken notice. In fact, 31.4% of all financial transactions in 2021 were in the Vitamins & Supplement sector.  While undoubtedly an attractive proposition, investors should take heed as the supplement market is on the verge of a transition. The release of the revised Federal Trade Commission Health Product Compliance Guidance  released in December of 2022 has created a buzz that could have broad-reaching repercussions, and investors may want to go above and beyond traditional diligence. Here are a few highlights from the Health Products Guidance document of which Private Equity firms should be especially mindful: 

1) Dietary Supplement Claims: Label Liability

The new Health Products Guidance document revisits structure/function claims, which guides dietary supplement claims originally first detailed in the Dietary Supplement Health and Education Act of 1994 (DSHEA). The guidance highlights supplement clinical trials as the gold standard with randomized controlled human trials being a necessity to substantiate any claim that could be interpreted as a health-related claim. Who is the ultimate arbiter of interpreting whether something is a “health-related claim?” According to the FTC, an “average consumer” a reasonably observant and prudent consumer factoring in realities like social, economic, cultural and language variables. The magic cut-off? Based on our circles, just 10%! If 10% of consumers consider your claim “health-related,” then it is. And it’s not just the language on pack, it’s the pictures too, as well what is found in your marketing, social media outlets, e-newsletters, and websites.

This makes perception a reality, one to which everyone vested in the industry (especially investors) should pay attention. It definitely warrants a risk assessment of all labeling, website, social media and other marketing materials. However, the real call is to have rock solid substantiation for any claims made on any of those outlets. 

2) Opportunity to Differentiate through Dietary Supplement Clinical Trials

When it comes to today’s dietary supplement product claims, at best consumers see on pack label claims like “aids in…” or “supports…” to imply without explicitly stating the health benefits. This more passive approach to label claims may satisfy the most cantankerous regulator as meeting the spirit of structure/function claims and not overstepping bounds into the ‘medicine’ category. However, there’s an opportunity for improvement when it comes to marketing effectiveness.

The new Proof-As-A- Service category, pioneered by Radicle Science, is the first of its kind to arm non-pharmaceuticals with the ability to prove effectiveness beyond placebo utilizing AI-enabled, standardized clinical trials, powered by a crowdsourced, direct-to-consumer model. Not only do you obtain objective evidence to substantiate powerful marketing claims, but it can also better inform your research and development pipelines and strategic direction.

Supplement clinical trials that don’t break the bank? Check. Fits with the product launch timeline? Check. Satisfies the FTC guidance? Check.

3) Commanding a Price Premium through Proven Claims

According to Columbia University Irving Medical Center, most of the 80,000 supplements on grocery store shelves have never been tested. The result? Brands resort to the use of passive claims. But what if with clinical trials, you were able to distinguish your brand in this crowded space? How could making a claim like “clinically proven to…” be a new tool in your toolbox that could change the outcome of your next retail pitch?

Perhaps you’re considering an investment in a high performing brand with a unique value proposition that just needs the marketing ‘vroom’ to be the next blockbuster brand. Consider dietary supplement clinical trials and the resulting “clinically proven…” claims to not only command and warrant a price premium, but to satisfy regulatory obligations and delight consumers.

When considering a potential investment, consider the implications of this new FTC guidance. It could be a liability if the product makes unsubstantiated health claims. However, if deployed strategically, it could give you a new evidence-based reason to differentiate and win with consumers and retailers.

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