Health Foods

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Health Markets:

Market Assessment Publications Ltd.
Market Study July 2003

The value of the health food market covered in this report amounted to £2.08bn in 2002. This represented an increase of just over 10% on the 2001 figure, compared with considerably higher growth rates during the previous 2 years. The four key sectors consist of organic foods; functional foods; vitamins, minerals and supplements (VMS); and alternative remedies.

The slowdown was most marked in the organic and functional foods sectors, both of which have previously experienced unusually high growth, and are displaying some signs of maturation. The VMS sector has been growing slowly, while sales of natural remedies have continued to increase at a steady rate.

The prospect of European legislation has affected, or will affect, most sectors of the health food market in various ways, and has already taken up considerable resources, as manufacturers and retailers fight to make sure their views are properly represented. Arguably, the most urgent issue concerns the Food Supplements Directive, which covers ingredients and dosage levels in vitamin and mineral preparations, and is due to come into force in July 2003. A report from the Food Standards Agency, published in 2003, indicating that high doses of some vitamins and minerals could be harmful will deal a further setback to the specialist health foods industry.

On the corporate front, much of the activity during 2002 has indicated that it is the larger specialist companies that are in the best position to capitalise on the health foods market as it is at present. A number of large mainstream companies have scaled back their operations in health food sectors, while at the other end of the range there have been several acquisitions of small specialist companies by larger ones.

The current uncertainty in the market for vitamins, supplements and natural remedies is likely to have a negative effect on future sales, at least in the short term. Sales of organic food have begun to slow down as the market matures, while the market for functional foods will continue to grow at a steady, but unexceptional, rate.

Executive Summary 1

1. Market Definition 8

REPORT COVERAGE 8

MARKET SECTORS 9

Organic Foods 9

Functional Foods 9

Vitamins, Minerals and
Supplements 10

Alternative Remedies 10

MARKET TRENDS 11

Regulation and Legislation 11

Corporate Activity 11

Consumers and Lifestyle 11

The Media 12

ECONOMIC TRENDS 12

Inflation 12

Table 1: UK Rate of Inflation (%), 1998-2002 12

Household Disposable Income 13

Table 2: Index of Household Disposable Income
(index 1971=100), 1997-2000 13

MARKET POSITION 13

The UK 13

Table 3: The UK Market for Health Foods as a Percentage of the Total UK Household Food Market by Value
at Current Prices (% and £m at rsp), 2001 and 2002 13

Table 4: The UK Market for Organic and Functional Foods as a Percentage of the Total UK Household Food Market by Value at Current Prices
(£m at rsp), 2001 and 2002 14

Table 5: The UK Market for Vitamins, Minerals and Supplements as a Percentage of the Total UK Market for OTC Medicines, by Value
at Current Prices (% and £m at rsp), 2000 and 2002 14

2. Market Size 15

THE TOTAL MARKET 15

Table 6: The Total UK Health Foods Market by Sector by Value
(£m at rsp and %), 1998-2002 15

by market sector 15

Organic Food 15

Table 7: The UK Organic Foods Market by Value at Current Prices
(£m at rsp and %), 1998-2002 16

Table 8: The UK Organic Foods Market by Sector by Value at Current Prices (£m at rsp and %),
April 2001-April 2002 16

Functional Foods 17

Table 9: The UK Functional Foods Market by Value at Current Prices
(£m at rsp and %), 1998-2002 17

Table 10: The UK Functional Foods Market by Sector by Value at Current Prices (£m at rsp and %), 2002 17

Vitamins, Minerals and
Supplements 18

Table 11: The UK Vitamins, Minerals and Supplements Market by Value at Current Prices (£m at rsp and %), 1998-2002 18

Table 12: The UK Vitamins, Minerals and Supplements Market
by Sector (%), 2002 18

Alternative Remedies 18

Table 13: The UK Alternative Remedies Market by Value at Current Prices (£m at rsp and %),
1998-2002 19

Table 14: The UK Alternative Remedies Market by Sector
by Value at Current Prices
(£m at rsp and %), 2002 19

Overseas Trade 19

3. Industry Background 21

INTRODUCTION 21

Recent History 21

Number of Companies 21

EMPLOYMENT 21

REGIONAL VARIATIONS IN THE MARKETPLACE 21

DISTRIBUTION 21

Wholesale 21

Retail 22

HOW ROBUST IS THE MARKET? 22

LEGISLATION 22

Key Trade Associations 23

Consumers for Health Choice 23

Health Food Manufacturers’ Association 23

National Association of
Health Stores 24

Organic Food Manufacturers Liaison Group 24

Proprietary Association of Great Britain 24

Soil Association 25

4. Competitor Analysis

THE MARKETPLACE 26

MARKET LEADERS 26

A Nelson & Co. Ltd 26

Aromatherapy Products Ltd 27

The Boots Company PLC 27

Cauldron Foods Ltd 28

GR Lane Health Products Ltd 28

Haldane Foods Ltd 29

Holland & Barrett Retail Ltd 29

Peter Black Healthcare Ltd 30

Roche Holding (UK) Ltd 30

Seven Seas Ltd 31

Vitabiotics Ltd 31

OUTSIDE SUPPLIERS 32

Organic Farming 32

Table 15: Organically Managed Land in the UK by Area
(hectares and %), April 2001
and April 2002 32

Table 16: Number of Registered Organic Producers,
April 1997-2002 33

marketing activity 33

Table 17: Main Media Advertising Expenditure on Health Foods by Sector (£000 and %),
Years Ending March 2002
and 2003 33

Vitamin Preparations 34

Table 18: Main Media Advertising Expenditure on Vitamins and Tonics (£000), Years Ending March
2002 and 2003 34

Slimming Aids and Foods 36

Table 19: Main Media Advertising Expenditure on Slimming Aids and Foods (£000), Years Ending March 2002 and 2003 36

Organic Foods 36

Table 20: Main Media Advertising Expenditure on Organic
Foods (£000), Years Ending
March 2002 and 2003 37

Exhibitions 37

Advertising Standards 37

5. Brand Strategy

INTRODUCTION 38

RESEARCH FINDINGS 38

Table 21: Brands of Vitamins, Supplements or Herbal Remedies Taken on a Regular Basis (% of all adults), 1999, 2001 and 2003 39

Table 22: Regular Usage of Vitamins, Supplements or Herbal Remedies by Sex, Age, Social Grade
and Region (% of all adults,)
2001 and 2003 40

Table 23: Brands of Supplements or Herbal Remedies Taken on a Regular Basis by Sex (% of all men and
all women), 2003 42

Table 24: Regular Users of Selected Brands of Supplements by Sex, Age, Social Grade and Region
(% of all adults), 2003 43

COMPANIES’ BRANDS 44

Seven Seas 44

Roche (UK) Ltd 45

Peter Black Healthcare 45

Vitabiotics 45

GR Lane Health Products 45

Advertising and Promotion 45

Table 25: Main Media Expenditure by Leading Advertised Brands of Vitamins and Supplements (£000),
Years Ending March
2002 and 2003 46

6. Strengths,Weaknesses, Opportunities and Threats

STRENGTHS 48

WEAKNESSES 48

OPPORTUNITIES 49

THREATS 49

7. Buying Behaviour

consumer PENETRATION 50

Vitamins, Cod Liver Oil and Other Supplements 50

Table 26: Penetration of Usage of Vitamins, Cod Liver Oil and Other Supplements (% of adults),
1998-2002 50

By Sex 50

By Age 50

By Social Grade 51

By Region 51

Table 27: Penetration of Usage of Vitamins, Cod Liver Oil and Other Supplements by Sex, Age, Social Grade and Region (% of adults),
2001 and 2002 51

By Frequency of Use 52

Table 28: Frequency of Usage of Vitamins, Cod Liver Oil and Other Supplements (% of adults),
2001 and 2002 52

By Type of Product 53

Table 29: Penetration of Usage of Vitamins, Cod Liver Oil and Other Supplements Taken Regularly
(% of adults), 2001 and 2002 53

8. Current Issues

ORGANIC STANDARDS 54

REGULATORY ISSUES 54

The Food Supplements Directive 54

FSA Report on Dietary Supplement Doses 54

Traditional Herbal Medicinal
Products Directive 55

Amendments to the Medicines Directive 55

Sports Nutrition 55

Nandrolone 56

Kava Kava 56

Research 56

Corporate Issues 56

New Product Development 57

9. The Global Market

EUROPE 58

Vitamins and Supplements 58

Organic Market 58

Table 30: Organic Farms and Farmland in Selected European Countries by Area (000 hectares and number),
2001 58

Table 31: Population and Organic Retail Sales in Selected European Countries (million and £m),
2001 59

Company News 60

The US 60

Vitamins and Supplements 60

Organic Market 60

10. Forecasts

INTRODUCTION 61

market growth 61

Figure 1: The Total UK Health Foods Market by Value at Current Prices
(£m at rsp), 2003-2007 62

FORECASTS 2003 to 2007 62

Table 32: The Forecast UK Health Foods Market by Sector by Value at Current Prices (£m at rsp),
2003-2007 63

Future Trends 63

Legislation 63

The Corporate Environment 64

11. Company Profiles

The Boots Company PLC 66

Holland & Barrett Retail Ltd 68

Roche Holding (UK) Ltd 70

Vitabiotics Ltd 72

12. Company Financials 74

13. Further Sources

Associations 76

Publications 76

General Sources 77

Bonnier Information Sources 77

Government Publications 78

For full details, please email matthewt@cmsinfo.com

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