Getting around the North American b2b market successfully Len Monheit, Executive Director, Engredea

Getting around the North American b2b market successfully Len Monheit, Executive Director, Engredea

Presentation Outline Current news Market numbers Economics Culture Supply, quality issues (inc. GMP) and regulations Market Knowledge Distribution and channels Certification & standards How the industry operates Marketing & communications Industry global calendar How to do a trade show properly Other business considerations To brand or not to brand The value of research and patents Doing business best practices Resources to consider

CURRENT NEWS

THE NUMBERS

Global Nutrition Industry: 2000 vs. 2009

Nutrition Industry Sales by Region

ECONOMICS

Global recession has shifted trade balances Trading issues is it really a business friendly environment? The power of emerging versus emerged economies Access to capital

March 2011 - World s third-largest economy faced one of its worst natural disasters ever damage caused.are estimated at ~$300 billion. Will global growth continue? Two economies (45% and 5% since 2005) Will Europe really work? A recovery in the Euro-zone and the U.S. could help improve trade prospects for Asian economies in the coming months.

CULTURE & PERCEPTION

Is there a future in trading alliances? Is there an East versus West bias? Predicting trends and opportunities by understanding culture Defeating any anti-country bias is possible

UNDERSTANDING THE US INDUSTRY

Let s face it.it s very confusing..

SUPPLY, QUALITY ISSUES AND REGULATIONS

FROM THE FDA..

U.S. Border Finished Product FOREIGN Raw Material Tainted Supplement Pathway to Market Importer DOMESTIC Contract Manufacturer(s) (bottler, labeler, ingredient manufacturer, encapsulator) Niche/Community Distributors Own Label Distributors Large Distributors Consumer

Suppliers are expected to do more For the same price Includes research Performance testing Technical support And high quality More transparency expected in supply chain Even though ingredient companies do not fall directly under the US supplement GMPs, GMPs require ingredient testing rather than just a C of A and other activities that will challenge unprepared companies.

REGULATIONS & LEGISLATION

Development of regulations (India, ASEAN, Latin America) Changing and export of regulations (EU, US) Key areas are quality (GMP s, supply chain), claims, new products, safety issues Leading to focus on 3 rd party certification, testing and analytical methods, Certificates of analysis, vendor qualification programs In the US, new draft guidance on New Dietary Ingredients is the most important document from the FDA in 17 years, since the passage of DSHEA.

Current US Issues FSMA Supplement quality and efficacy debates (in the news) DSHEA new and recent developments GMPs NDIs

GMP and Related Issues Firm failed to conduct at least one appropriate test or examination to verify the identity of a dietary ingredient, prior to its use, as required by 21 CFR 111.75(a)(1)(1). Over 75% of GMP inspections have results in 483s. FDA disappointed in industry performance with GMPs.

MARKET KNOWLEDGE

DISTRIBUTION & CHANNELS

Finished Product Channels Direct to consumer Internet Television Practitioner Retail (Natural or grocery) Mass (Costco, Walmart, Sam s) Multi-level marketing

Possible selling approaches Shotgun approach take whatever business comes Or Channel strategy identify target areas by either sales model or product type and choose best candidates operating in that sales channel on exclusive or semi-exclusive basis

Distribution or Direct Earliest and basic question facing both ingredient and finished products companies in international markets Decision based on: Product uniqueness Research, brand equity and IP Cost Technical and specific knowledge required to sell If direct, from an international or US base? If US, same or unique name?

Choice of Distributors is key Decisions include: National or regional Key or all accounts Breadth of portfolio Yours do you offer product specific rights? Theirs can they give enough attention to your products? Category specific (food, drug, supplement, beverage) Commodity or brand focused Cultural fit Sales ability Penetration level Your patience level

CERTIFICATION AND STANDARDS

General considerations Geography (origin, target, credibility) Appropriateness of use of certification Certifications 3 rd party quality standards such as GMP (USP, NSF, NPA) Regulatory approvals (formal, notified, GRAS, NDI etc.) Kosher Halal Organic (USDA, Australia and Swiss also widely recognized) Natural? Natural Products Association many products certified) No formal definition internationally other than NPA Other: gluten-free, low glycemic

HOW THE INDUSTRY OPERATES

How the industry operates Relationships 5-6 Trade associations in the US American Herbal Products Association (AHPA) Consumer Healthcare Products Association (CHPA) Council for Responsible Nutrition (CRN) Global Organization for EPA and DHA Omega-3s (GOED) Natural Products Association (NPA) United Natural Products Alliance (UNPA) Not for profit organizations American Botanical Council (ABC) Vitamin Angels Nourish America

How the industry operates Print Publications Ingredients to manufacturers: Functional Ingredients Nutraceuticals World Nutritional Outlook Nutrition Industry Executive Natural Products Insider Prepared Foods Manufacturer to Retail Natural Foods Merchandiser Vitamin Retailer Whole Foods magazine Supermarket News

How the industry operates Digital Products: Newsletters Engredea (Daily, Weekly and Asia version) Functional Ingredients e-news Nutraingredients (EU, US and product newsletters) Foodingredientsfirst.com Websites - Newhope360.com - Supplyside community - Nutraingredients Social Media like LinkedIn, YouTube, Twitter, Facebook

Marketing and Communications News Press releases Articles Research White papers (technical papers)

Social Media Rising in importance A LinkedIn presence is absolutely required Participate actively but responsibly Advance the discussion, be careful how you promote your company and products

The future of social media? Most companies have very poorly developed strategies Very difficult to measure A mixed communication strategy has to be in place One of the best ways to connect and introduce internationally

IT TAKES ALL TYPES OF COMPANIES..

Example 1 Zhejiang-based company Set up -USA company 5 years ago Currently leading North American coenzyme Q10 supplier Member of two industry trade associations Third party certification (USP)

Example 2 Bangalore India-based company Set up -USA company 15 years ago Currently leading North American supplier of numerous ingredients Have won a NutrAward Member of three industry trade associations Deep research and IP portfolio Long-term contracts with supporting farmers Repeated sponsor of industry education and special events

Example 3 Mumbai based company Has participated in two US tradeshows Generally receives a handful of leads at each show Most do not result in business Does not have certification Does not belong to a trade association Has no unique selling proposition other than low price

Example 4 Numerous China-based manufacturing operations US operations from Montana USP and TGA manufacturing certificates Active engagement with industry leadership Member of one trade association in US

The US industry calendar March Engredea (Anaheim, California) Natural Products Expo West (Anaheim, California) May SupplySide East (NY) either late April or May June IFT (different locations but Chicago is best) Natural Products Association Marketplace July NBJ Summit (Dana Point, California) September (2012 editorial calendars prepared) Natural Products Expo East October SupplySide West (Las Vegas, Nevada)

OTHER BUSINESS CONSIDERATIONS

Decisions to make To brand or not to brand To invest in research Population specific? To invest in intellectual property To achieve third party certification How to approach business What principles does the company stand for Short term or long term Commodity or specialty

RESOURCES AVAILABLE

Media relationships Trade associations Experts Consultants, marketing professionals and experienced industry people who can help Choose wisely! Get the right legal relationships

In closing. Do your preparation and be patient Get representation on the ground quickly Make sure you have a unique value proposition Know and understand the culture of the marketplace

Len Monheit Executive Director, Engredea New Hope Natural Media len@npicenter.com +1-303-998-9310