After five years of unprecedented growth since the passage of the Dietary Supplement Health and Education Act of 1994 (DSHEA), sales of herbal products have leveled off, or, as some surveys suggest, may even be dropping slightly below last year's levels. Since the much-touted "boom" heralded by the cover story of TIME magazine (Nov. 23, 1998) and HerbalGram's 16-page market report (Brevoort, 1998), members of the herb industry have experienced increased inventory levels among suppliers of raw materials and bulk extracts, slower re-orders of materials from manufacturers, and a drop in the rate of growth of finished herbal products in retail markets. This "adjustment" began around the same time, the fall of 1998, that three large pharmaceutical firms entered the herbal market (Bayer, Warner Lambert, Whitehall-Robbins), despite heavy consumer advertising by both established companies and new entrants.

Some industry veterans had anticipated that the entry of the new companies would attract the approximately 60 percent of the American adults who are not herbal consumers, but sales statistics do not support this. Research suggests the opposite: new entrants into the herbal market may be "cannibalizing" the existing business from established sellers instead of bringing new customers into the market. The size of the pie has not grown, but with more sellers, the slices are getting thinner.

Accurate statistics for the herbal market have always been difficult to obtain, because many herbal products were sold in the health and natural food trade, through direct sales and multilevel marketing organizations, and through alternative healthcare practitioners. These channels of distribution are usually not well measured by the leading organizations that track retail sales in the mainstream channels, e.g., Information Resources Inc., and A.C. Neilsen. In the past five years, sales in the mainstream market (food, drug and mass market, FDM) have shown unprecedented growth. As table 1B indicates, sales for herbs for calendar year 1998 were 55.4 percent greater than 1997 ($688,636,560 in 1998 vs. $442,928,512 in 1997). However, for the first eight months of 1999 (through September 5), total herb sales in FDM were $488,288,384-a 0.2 percent drop in dollar amount from the same period in 1998, $489,197,184 (table 1A) (IRI, 1999). However, sales of total units are up slightly. Th e apparent discrepancy is explained by the possibility that there is an increase in sales of private brands and larger sizes in some outlets, including warehouse clubs (not usually included in IRI scanner data). For the first six months of 1999, herb sales in FDM were 11 percent higher than the same period in 1998. This suggests a significant drop in sales during July and August to account for the 0.2 percent total drop for the herb category in the eight-month period in 1999 compared to 1998. July and August are characteristically slow months for herb sales, suggesting that brisker sales levels will resume during the traditionally strong sales period in the fall and winter months. Also, St. John's wort is down 23 percent, partly accounting for the drop in total sales.

There is always the question of whether the sales trends in the mainstream market reflects the trends in other channels, i.e., health food, MLM, professional trade. According to the consensus of industry executives surveyed for this article, this is the case; sales are either level or down in all classes of trade.

Why is the rate of sales growth down? What is causing the downturn? Industry leaders offer several reasons. One veteran with over 25 years experience in the botanical industry, Jack Klein, former managing director of Muggenburg Extract and Finzelberg Extracts North America, now part of the American Ingredients LLC Joint Venture, sees several factors contributing to the current situation. First, Klein sees unreasonable consumer expectations in the mainstream market as a primary issue. He contends that mainstream consumers want herbs because they are perceived to be safer than conventional drugs, because they are natural, and because they are perceived to act more gently than conventional drugs. Unlike the more sophisticated natural food shopper who is usually more informed about the actions of herbs, the mainstream shopper is not as well educated. Mainstream consumers may expect the same results from herbs that they get from over-the-counter (OTC) drug products; they expect the h erbs to work immediately, just like OTC drugs. However, they may be less patient with the fact that many herbs require several days if not several weeks or even more to produce a noticeable benefit. Klein notes, "The irony in this whole thing is this: the reason many consumers are willing to experiment with herbs is their dissatisfaction with side effects of conventional drugs. They haven't understood that buying something that is more natural is a `different rhythm.' The irony is that what is bringing mainstream consumers to the category is also the same thing that may be turning them off." He adds, "To switch the mainstream over is really a massive educational task. Just putting some claim out in an ad is not enough; it's not going to do it." Klein also notes that the public perception of poor quality control and product quality in the herb industry reinforces the lower expectations of some consumers. In addition, the expectation for new customers coming into the market has been offset by some of the negative press being generated by the continued repetition of the erroneous phrase "unregulated industry" and persistent concerns about product quality. It is likely that many mainstream consumers are nervous about purchasing herbal products when they perceive the industry to be "unregulated" although, as many industry leaders know, there have been more regulations proposed by FDA in the area of herbs and dietary supplements in the past five years since the passage of DSHEA than in the thirty years prior. Another industry veteran, Loren Israelsen, President of the LDI Group in Salt Lake City, agrees. He has been tracking the publication of articles in major magazines and newspapers over the past year, and has noticed a definite trend toward negative articles that criticize the supplement industry for lack of quality control and potentially unsubstantiated claims on some products. Israelsen sees the press becoming more "investigative" and this trend may be contributing to the poor performance in the herbal market. Israelsen also observes that with the increased genericization of the herbal industry and increased sales of private label brands, there may be more units of herbal products sold, but because their prices tend to be lower than nationally advertised brands, the total dollar amount is lower. A small bit of good news: Despite ups and downs for the herbs shown in the table below, a noteworthy development is that the largest gain for any single herb was for black cohosh, rising 477 percent in the first eight months of 1999 compared to the same period in 1998: $586,469 to $3,385,393 (IRI, 1999). This is possibly due to the increased publicity black cohosh received in early 1999, documenting its benefits for menopausal symptoms (Foster, 1999). REFERENCES Brevoort P. The Booming U.S. Botanical Market: A New Overview. HerbalGram. 1998;44:33-48. Foster S. Black Cohosh-Cimicifuga racemosa. HerbalGram. 1999;45:35-50. Gottlieb B. Vitamins, Minerals, Herbs and Supplements: A Year in Review. The Hartman Group, Sep. 30, 1999. Israelsen LD. Personal communication Sep. 29, 1999. Klein J. Personal communication. Sep. 15, 1999. Information Resources, Inc. Scanner Data for FDM. 1998;1999. Article copyright American Botanical Council. ~~~~~~~~ By Mark Blumenthal