TABS Group’s Eighth Annual Vitamin and Sports Nutrition Survey (findings presented in a webinar in May 2015) showed some surprising trends and changes from prior years, particularly regarding shifts in long standing channel preferences among consumers. Coupled with the changes in consumption patterns discussed in our last blog post, these preferences may be showing the early signs of fundamental changes in the industry.
Survey and Channel Definition
For questions regarding channel preferences, the survey used the following definitions:
Mass Market: Food, drug, mass merchandisers, club and dollar stores. This is also referred to as FDMCD in the survey white paper and webinar.
Non-FDMCD: Nutritional specialty stores, natural food stores, online, catalog, multilevel marketing and other similar channels. It’s important to note that Meijer, formerly classed as “other” is now classified as mass market.
The survey included input from 1015 geographically and demographically dispersed consumers.
TABS Group estimates that the vitamin and nutritional supplement market size is about $11.8 Billion, which shows a 3 percent growth rate from 2014 survey results. Despite this growth, the number of times consumers purchased products in the category is less than in prior years, and the number of products that consumers use has also showed a downward trend. For more information on the details of the reduced consumption, read the white paper, which provides a complete analysis of the survey findings.
Also note that there has been a fair amount of controversy over the size of the market shown in the TABS Group survey compared to other industry estimates. TABS Group stands by its estimates and research methods and has complete confidence that it’s numbers are correct.
Penetration by Channel
Online continues to be the largest channel for vitamin and nutritional supplement purchases. Although online showed a drop in sales for the first time ever, overall sales reached $1.9 Billion in 2015. Pure play online vendors captured 80 percent of the online share, compared to only 67 percent in the last two surveys.
Amazon captured 36 percent of the volume, followed by Drugstore.com at 9 percent, Puritan at 8 percent, Vitacost at 6 percent and Swanson at 5 percent. Rounding out the pure play online vendors was eBay at 3 percent.
For online vendors who also have a bricks and mortar presence, Wal-Mart and CVS took the lead at 4 percent each, followed by Target at 3 percent.
The Vitamin Shoppe, Walgreens, Costco, GNC and Sam’s Club all had 2 percent. Vitamin World came in at 1 percent.
Online is clearly the winner as the strongest channel, but other strong contenders include Wal-Mart, Costco, grocery stores, CVS and Walgreens.
Despite their overall strength, the bricks and mortar companies lost online share. Possibly because of a lack of compelling promotions. In addition, changes in SEO algorithms by the major search engines, including Google and Bing, led to unexpected changes in page rank results, which may have hurt online sales. The popular press also included a variety of articles casting doubt about the efficacy of herbs and some supplements, which may have caused a drop off in sale.
The Effects of Promotions and Deals
Retailer promotions helped to keep sales from dropping in the mass market, and may account for some, if not all, of the loss of spend in online channels. A simple search will show that very few promotions for the category exist in online channels, while promotions abound in real world stores.
Promotions and deals drive more activity among heavy users (6 or more products) than in light users (fewer than 6 products). Active tactics tend to incent heavy users more than light users. Those consumers in the light user category respond less to deals overall, although they respond better to passive tactics more than they do to active tactic deals. Heavy users respond better to both tactics, but even they respond to passive tactics more than active.
Despite fears that promotions simply cannibalize future sales, retailers should not be afraid to offer promotions. Promotions do appear to drive heavier usage, and deals and promotions drive consumers to a particular channel for their purchases. Mass market outlets benefit more from deal and promotion activity than specialty channels, but all channels benefit.
The most popular promotion type is the BOGO (buy one; get one) at 55.6 percent of successful promotions. Price promotions and percent off deals were less frequent at 20.7 percent and 16.9 percent respectively.
Ad support for mass market sales was also stronger this year than in 2014, which coupled with the abundance of promotions contributed to the strength of the overall channel.