Customers still taking the pills

By SIMON HENDERY marketing writer

Three months after the Pan Pharmaceuticals bomb fell on the transtasman health supplements market, the local industry says customer loyalty towards its products remains strong.

Nutra-Life chief executive Mark Mathews says data to mid-June - the latest available - showed supplement sales were down 20 per cent on the same time last year.

For some supplement categories which had not been affected by the recall - for example joint care and menopause remedies - sales were up on last year "which indicates that there is still a lot of confidence in the dietary supplement category as a whole".

"The anecdotal feedback and the numbers would suggest to us that the consumers are quite loyal to the category and they understand it was an issue of a single manufacturer that's failed rather than there being an issue with dietary supplements as a product," Mathews said.

Anecdotal evidence was that healthfood outlet sales were down 10 to 15 per cent but "that's to be expected because consumers who shop at healthfood stores are a little more dedicated to the category again".

Australian manufacturer Pan Pharmaceuticals had its licence suspended in April because of serious quality and safety breaches. Claims against the company have so far topped A$160 million ($177 million).

The New Zealand industry says the recall of products with Pan ingredients in this country cost it about $5 million and there has been a further $10 million in "opportunity losses" since then. Nutra-Life had 180 products affected by the product recall - representing about 35 per cent of sales turnover.

Mathews said congestion in the manufacturing process as a result of Pan's closure meant only about a quarter of those products were back on the shelves. He expected that figure to rise to 90 per cent by the end of next month.

"From a brand marketer's point of view our challenge will be to get those who are using other products in the meantime back on to our brand."

The company was still finalising a brands-focused marketing campaign which it would run once most of its products were back on the shelves.

"We'll be talking about the place of dietary supplements in people's lifestyles and there's more and more evidence coming out to support that. In general we'll be reinforcing the fact that dietary supplements have a role to play in people's health and wellbeing."

He said the campaign would be more product-specific than a recent television campaign by competitor Healtheries.

"The message is best communicated by highlighting the benefits of specific products."

An industry group formed by the National Nutritional Foods Association in the wake of the Pan case, the Health Food and Supplements Advisory Council, had spent about $70,000 on a "reassurance" campaign based on newspaper advertising and public relations.

NNFA president Bill Bracks said he would be seeking more money from association member companies to continue the campaign.

The chair of the NNFA's regulatory subcommittee, Roger Sanderson, said latest anecdotal evidence suggested sales through most outlets were now back to last year's levels with some stores reporting sales up on last year.

The New Zealand health food and supplement industry has an annual retail turnover of $222 million. It also exports approximately $100 million of supplements and supplement ingredients and employs more than 3000 people.

The way the Ministry of Health handled the product recall still irks the industry.

Sanderson said the industry was taking legal advice and investigating whether it could take legal action against the ministry on the grounds that the recall had not complied with the Food Act given that only one Pan product had been confirmed as tainted.

"It is beyond belief that a serious adverse reaction to an orthodox pharmaceutical drug [Travacalm] turned into a disaster for the healthcare industry," Bracks said last month.

"Only time will tell what the hidden long-term damage has been to our industry. It dented public confidence in our products and caused widespread confusion among consumers wanting to know why our products were recalled and when they will be back on shelves.

"Our consumers need to know that in New Zealand health foods and supplements are regulated by the Food Act and a raft of other acts, laws and codes."