Charting New Marketing Strategies for 2013 and Beyond!

1. Charting New Marketing Strategies for 2013 and Beyond!

2. Steady Growth Despite Economic Factors • The U.S. Natural Product industry grew from $30 billion in 2011 to $32 billion in 2012 (steady 7% growth) • In 2012, dietary supplements alone accounted for $11.5 billion in sales • Growing Categories: Omega-3s; Joint Health; Eye Health; Digestive Health (esp. Probiotics) (Sources: Nutrition Business Journal and Nutritional Supplements in the U.S. report issued by Packaged Facts)

3. Steady Growth Despite Economic Factors In 2012, more than two thirds of all American adults (68%) said they use nutritional or dietary supplements. Self-described “Regular” Supplement Users by Age Bracket: (as opposed to “Seasonal” or “Occasional”) • Ages 18-34 – 57% • Ages 35-54 – 71% • Ages 55-plus – 76% (Source: Survey by the Council for Responsible Nutrition)

4. Steady Growth Despite Economic Factors Economic factors, rather than thwarting growth, may be helping to fuel it… • Consumers are looking for less-costly alternatives to medical bills. Preventive health is an investment! • They’re also watching the Dr. Oz Show and taking action on his tips. (We’ve all witnessed the rollercoaster in product availability after he promotes a supplement.)

5. Getting Products to Market: Compliance Affects Everything! Before you decide to enter or expand in this market, you need to know: • How to leverage brands in a compliant fashion • Differentiation and Positioning—product niche, formulation/application, compliant USPs and consumers’felt needs • Distribution strategies that address compliance challenges

6. Getting Products to Market: Compliance Affects Everything! Before you decide to enter or expand in this market, you need to know: • Marketing strategy (and budget) that is compliant but effective—including synergistic partnerships (piggyback visibility) • Intellectual property issues—protecting compliant names and taglines!

7. You cannot afford to be flagged for non-compliance! Warning First, Cost Second Cost to revise and re-print all material • Time • Money • Reputation Compliance from the start saves:

8. You cannot afford to be flagged for non-compliance! “Our print materials and our ads are compliant. So, we’re set, right?”

9. You cannot afford to be flagged for non-compliance! Not necessarily. Have you looked at your: • Website • Facebook and other social media platforms • Customer testimonials • Retailer/Employee education materials (you can be a little more open here, but still NO disease claims) • Product manufacturers’ level of compliance (both packaging text and quality standards)

10. FDA Warning Letters – Recent Trends Highlights from a 3-week period in February Warning letters sent to drug and supplement companies: (Excluding warnings to food manufacturers and medical devices) • 41% went to pharmaceutical companies; most were regarding unapproved generic versions of Tamiflu • 59% went to dietary supplement companies • Half of these were related to cGMP violations • The other half were related to non-compliant cold and flu claims

11. FDA Warning Letters – Recent Trends Major Target: Cold & Flu Prevention • Intro paragraph in a form letter to several companies: • “This is to advise you that the United States Food and Drug Administration ("FDA") and the United States Federal Trade Commission ("FTC") reviewed your website … in January, 2013. The FDA has determined that your website offers products for sale that are intended to diagnose, mitigate prevent, treat or cure the Flu Virus in people. These products have not been approved or cleared by FDA for use in the diagnosis, mitigation, prevention, treatment, or cure of the Flu Virus.” • All the letters in this category involved the FDA and FTC citing websites for non-compliant cold/flu claims.

12. FDA Warning Letters – Recent Trends Major Target: Cold & Flu Prevention Non-compliant disease claims that were flagged: • Powerful cold and flu defense • Taken at the first sign of a cold or flu symptom • Taken throughout the cold season as an effective preventative • Available in the Cough & Cold Section • Boost your immune system and fight cold and flu • Single most powerful formula to help guard your health • Most effective alternative to the flu shot

13. FDA Warning Letters – Recent Trends Major Target: Cold & Flu Prevention Study Summaries and “historic uses” are often non-compliant: • Resveratrol has been studied as an antiviral, inhibiting certain flu and respiratory viruses taken at the first sign of a cold or flu symptom • Garlic is used historically in treating flu • 14 different clinical trials of Echinacea use found that taking the supplement helped people get over cold and flu symptoms a day and a half earlier

14. FDA Warning Letters – Recent Trends Major Target: Cold & Flu Prevention DSHEA applies to Facebook, Twitter, testimonials and pressreleases. All of the following resulted in FDA warning letters: • Tweet: “Get your #flu vaccine and keep (PRODUCT) handy to prevent the flu this season.” • Testimonial: “I’ve been using (PRODUCT) for 9 months and feel like I’ve dodged everything coughed, breathed or recycled at me, even through a rough germ-filled winter.” • News Wire Headline: “Strong Flu Season Grips the Nation, Leaving Americans Scrambling to Protect their Families.”(The FDA stated that this headline “demonstrates the intended use of your product.”)

15. FDA Warning Letters – Recent Trends Lessons Learned • When it comes to immune health, the only compliant claim is: Supports a healthy immune system • The FDA and FTC are teaming up on reviews • The same keywords that drive customers to your site, may drive an FDA or FTC inspector to your site as well • Even study-supported description of an ingredient’s “history of use” can be flagged if it involves reference to ANY disease state

16. FDA Warning Letters – Recent Trends Lessons Learned • Both manufacturers and online stores have been cited • No, it’s not as common, but retailers do get FDA warning letters, especially when their materials and websites: • Recommend products for specific diseases/conditions • Give overt medical advice • Tout specific natural products as alternatives to FDA-approved pharmaceuticals • Retailers are legally required to abide by DSHEA • (Source: “Roadmap for Retailers” report by CRN)

17. FDA Warning Letters – Recent Trends Major Target: cGMP Compliance Regulatory Pressure Directed at the Products You Offer From warning letters addressing quality assurance: • You failed to prepare and follow a written Master Manufacturing Record (MMR) for each unique formulation • You failed to establish product specifications for the identity, purity, strength, and composition for each dietary supplement you manufacture • Your MMRs failed to include actions necessary to ensure quality, such as mixing/blending instructions, times, and equipment, and acceptable capsule weight range

18. FDA Warning Letters – Recent Trends Major Target: cGMP Compliance Regulatory Pressure Directed at the Products You Offer From warning letters addressing personnel violations: • You failed to identify any employee(s) responsible for quality control • You failed to make and keep documentation of training, including the date of the training, the type of the training, and the person(s) trained

19. FDA Warning Letters – Recent Trends Major Target: cGMP Compliance Regulatory Pressure Directed at the Products You Offer The devil is in the details! • Your laboratory does not follow the USP Microbial Limits Method for Total Plate Count and Yeast and Molds • The initials of the person responsible for weighing or measuring… was not documented • You rely on certificates of analysis (COA) from the suppliers…but you failed to qualify the suppliers by establishing the reliability of the suppliers’ COA • You did not have written procedures for calibrating, inspecting, and checking your digital weighing scale or mechanical blender

20. FDA Warning Letters – Recent Trends Lessons Learned • If you manufacture your own brand, your entire management team must understand and implement cGMPs. Do NOT cut corners. • Make sure your contract manufacturer is following cGMPs with comprehensive documentation. A manufacturer with OTC and pharma-grade standards is best. • “Small” companies are not immune to inspections. All of the cGMP violation warnings we reviewed were for companies with low brand awareness.

21. FDA Warning Letters – Recent Trends Lessons Learned • Retail-only entities are affected, too: • Specific brands and products can be temporarily unavailable while a company remedies compliance violations. • So.. • Diversify your brand offerings in each category. • Research your offerings and focus on brands with a solid record in compliance and quality.

22. FDA Warning Letters – Recent Trends See for yourself… http://www.fda.gov/ICECI/EnforcementActions/WarningLetters/default.htm

23. A Quick Compliance Review • Heals, cures, relieves • All diseases and conditions Terms to avoid: • Promotes/Supports healthy ______ . Terms to use: Hire an agency with copywriters experienced in writing compliant text • Run all consumer literature, labels, web copy past your attorney BEFORE publishing

24. There’s an Art to This Use Special Caution in Hot-Button Areas • Immune Support • Inflammation • Heart Health • Weight Management • Blood Glucose Levels • Children’s Products • Dermal Health and Topicals (yes, the FDA monitors these)

25. There’s an Art to This Sample Verbiage For example… Communicating a product’s anti-inflammatory properties • Absolutely NO: soothing, reducing, pain-relieving, or anti-inflammatory effects • Safe: “Supports healthy range of motion.” • Moderate Risk: “Promotes a healthy, balanced inflammation cycle.”

26. There’s an Art to This Know Your Reader Are you marketing toward a physician? Then “Supports leukocyte health and function” might be helpful in communicating your non-compliant “wound healing” claim. Are you marketing toward a consumer? You might need to use “Supports the skin’s healthy rejuvenation” An example of how distribution strategies can address compliance challenges!

27. There’s an Art to This Before and After Non-compliant: “Rids the body of harmful toxins” Revision – Consumer:“Supports the body’s ability to detoxify itself” Revision – Retailer Staff Education:“Supports liver health and function”(Paired with “For Retailer Education ONLY. Not for Consumer Distribution.)

28. Reworking the Non-Compliant Claim BOTH the Claim & Educational Text are Non-compliant: “Successfully addresses magnesium deficiency” “Magnesium deficiency can lead to life-threatening health conditions” Revision: “Helps maintain healthy magnesium levels in the body” “The body provides lots of hints when it is running low on magnesium.”

29. Reworking the Non-Compliant Claim Non-Compliant Claim Compliant Revisions

30. Reworking the Non-Compliant Claim Non-Compliant Claim Compliant Revisions

31. Reworking the Non-Compliant Claim The “good source”— a regulation favorite! “A good source of electrolytes” (compliant only if a serving contains at least 10% of the RDI) “An excellent source of potassium” (compliant only if a serving contains at least 20% of the RDI) Revision: “Provides trace amounts of key electrolytes.”

32. So, You’re Getting Ready to Launch A Compliance Checklist • cGMP manufacturing • New Dietary Ingredient (NDI) filing • Substantiation Files • Awareness of AERs & SAERs  • DSHEA compliant materials – supporting all of the above!

33. Launch Prep • Integrated QA systems from raw ingredient to final product • Raw ingredient quarantine & verification • Batch testing • Final product testing • Prop 65 (in California, The Safe Drinking Water and Toxic Enforcement Act of 1986) • All process documentation provided • If they’re not opening their books to you, walk away. You can be liable for their mistakes. Ask Your Manufacturer About

34. Launch Prep • Your manufacturer is solid, and your marketing materials are compliant. • You’re getting ready to file NDI paperwork (if needed) and Substantiation Files. Are all your claims science-supported?

35. Support for Claims Compliant “healthy function” claims still require scientific support • Efficacy & Safety • Human Clinicals – ideally the gold standard (double-blind, placebo-controlled, at least 100 participants) • To say, “This proprietary blend supports healthy blood glucose levels already within the normal range,” you may need scientific support of your blend having efficacy in diabetic models.

36. Support for Claims We have to have scientific proof of curative value, but we still can only make the “healthy function” claim?

37. Support for Claims If we’re totally compliant, we can’t say ANYTHING about all those scientific studies! That’s not fair!

38. Working Within the DSHEA Framework Take a deep breath…remember what life was like before DSHEA The great extremes: • The FDA considered requiring “Food Additive” filing for supplements • There were shutdowns of vitamin companies • Meanwhile, there were some truly dangerous products on the shelves

39. Working Within the DSHEA Framework • DSHEA’s implementation may not be perfect, but it gave us a framework. • Let’s look at how to operate within that framework.

40. Working Within the DSHEA Framework • Balancing product safety and advertising honesty • with • The freedom to market health-changing products without intensive food additive or pharmaceutical-grade testing

41. Working Within the DSHEA Framework • Product Differentiation • PLUS • Compliant Consumer Education

42. Working Within the DSHEA Framework Compliance + Educational Strategy • Pair compliant marketing materials (packaging, brochures, advertising, web copy, testimonials—yes, all of it!) • WITH • Authoritative third-party literature that drives customers to your product

43. Solution #1: Third-Party Literature • Your company can’t be so forthright about your product(s), but a doctor or well-known industry professional can author literature that covers all the details. • Have your story told without saying a word.

44. Solution #1: Third-Party Literature Effective 3rd-party: includes unique terms and phrases identical to your brand’s compliant identifiers—especially when they don’t mention your brand by name (i.e. – a multi-strain probiotic, helper minerals for bone health, timed-release magnesium, polysaccharide-enhanced Aloe Vera, etc…) • At the store—this makes your brand stand out when the consumer reads labels • Online—this results in immediate highly-qualified hits

45. Remember, it’s credible third party literature only if… • The author is a health care provider, preferably an MD (the business owner CANNOT be the author) • Several products are mentioned (other than your brand; may be in complementary niches though) • There is a solid reference list to back the author’s claims

46. Solution #2: Leveraging Publicity to Educate Consumers • Bought • Guaranteed • Consistent • It’s you talking about you (self-promotional) • Often ignored Advertising • Can’t buy • Not guaranteed • Inconsistent • BUT, it’s others talking about you (endorsement) • Attention-getting Publicity

47. Solution #2: Leveraging Publicity to Educate Consumers Publicity = Trust & Credibility Publicity is third party validation from highly trusted, unbiased sources—news reporters. • Publicity placements lead to an immediate consumer response better than any other form of marketing buy • Vital for new businesses Trust & Credibility = Consumer Response

48. Solution #2: Leveraging Publicity to Educate Consumers • Properly prepare and present your information • Designate a spokesperson - charismatic, interesting, can tell your story well • Target buyers - order your products • Target consumers - drive them to your distribution channels Secrets of getting good publicity:

49. Solution #3: Leveraging the Internet for Consumer Education • U.S. online consumers spent an estimated $226 billion in 2012—up from $202 billion in 2011 and $165 billion in 2010 (Source: Forrester Research Inc. as cited by Internet Retailer) • Total internet sales in the natural products industry grew 13% in 2010 (Source: NBJ) • Double digit growth is expected to continue over the next several years • Increased availability of health and nutrition info online is likely to drive even more web sales • Websites must be designed to be “friendly” to both people and search engines

50. Solution #3: Leveraging the Internet for Consumer Education People are Searching Online for Your Products • In the U.S., 86% of people say search engines are the most efficient way to find info about products • 70% of people use the Internet for information before making online purchases • 63% of Internet users worldwide use the web to research a product or service before buying (Source: eMarketer survey) • 80% of individuals aged 32-44 buy products on the Internet (Source: Pew Internet & American Life Project)